How technology is changing insurtech claims management

By Christina Hill
Christina Hill at Verisk discusses a new chapter for claims management and how technology is changing claims management in insurtech

The digitisation of claims management is a fundamental aspect of a modern and robust insurance operating model – but many insurers are still limited to using legacy systems. This means claims are processed inefficiently across business units (BUs), says Christina Hill at Verisk. This lack of technology sees companies languish behind competition and lacking in API integration which can offer, for example, access to market systems and third parties, leaving them at a distinct disadvantage. 

The lack of digital investment in the industry is apparent, a recent ACORD Digital Maturity Study found that fewer than 30% of the top 130 worldwide insurers have a “truly digitised value chain”, and 13% of these are “not leveraging digital technologies within their current business processes.”

The legacy systems still in operation rely heavily on manual processes that do not allow for an easy, seamless, and timely user experience for employees. Due to system limitations some users must even rely on emails external to the claims system as part of the claims process. Not only is this inefficient, but the lack of oversight can also lead to duplications and errors – and even leave the process vulnerable to fraud. The end product can be prone to variation and anomalies that impact customer outcomes and satisfaction. 

Digitisation offers a ray of hope

Recently, we have seen insurers embrace digital solutions on a far greater scale than before, with rising adoption of next generation claims systems that play a vital role to boost operational efficiency gains and continuously raise the bar of claims service standards. 

These technological advances are poised to usher in a bright future for claims management systems – one where an insurer can oversee, manage and act on a claim in real-time on a single, integrated system. We will see the seamless integration of an individual’s unique assortment of datasets and tools, as well as integration of APIs from external third-party and market systems. This will create a flexible yet simple user experience that will benefit both operations and users. This future can already be seen taking hold on the London market, where the Lloyd’s Blueprint Two envisions state of the art systems, backed by AI, will supersede outdated legacy claims systems. 

This transition comes at a time where the consumer also expects a smart and simple digital experience and quick solution. This can be seen in ACORD data, which shows a doubling of digital-only interactions between insurers and their global customers from 2015 to 2020. Further studies by Celent reinforce this digital transition as they found the top priorities for a customer’s online experience during a claim was an interface that is simplistic, easily understood, and requires as little interaction as possible. This kind of user experience is something that only a modern end-to-end claims system can offer.

Pushing the boundaries of operational efficiency 

Centralising disparate systems and automating repetitive manual processes are important steps in driving efficiency and cost savings at a time when bottom lines are under sustained pressure. Additional features to streamline workflow and enhance reporting, analytics, predictive modelling, documentation, finance and fraud detection can also generate further efficiencies.

Enabling straight-through claims processing increases claims handling efficiency and optimises human resources by ensuring claims are handled by appropriately skilled staff, based on complexity, value and other segmentation factors. Often, different business units will currently handle all claims in the same way regardless of complexity or customer segment, meaning highly skilled technical claims handlers spending much of their time handling low-complexity claims.

AI set to take a leading role

With the claims industry’s talent pipeline under continued pressure, AI will play an increasingly important role in optimising the allocation of skilled resources by automating the triage and resolution of simple claims – and the pandemic has accelerated the adoption and acceptance of purely digital claim experiences. Celent found, for example, that in early Q1 2020, only a single-digit percentage of customers elected to use digital claims experiences but by mid-Q2 2020, over 90% of uncomplicated consumer claims at the largest insurers were being digitally and virtually adjusted — and customer satisfaction was steady or improving.

Meanwhile, integration with state-of-the-art counter fraud AI partners, built-in damage cost estimation tools, subrogation, AI-driven automated prediction, and more accurate reserving all contribute to reduced operating costs and cost per claim. AXA, for example, targeted a 0.8% improvement of its loss basis in 2020 by applying machine learning to fraud detection — a reduction that represents millions on the company’s bottom line.

Bringing this all together, savings from reduced indemnity leakage, more efficient subrogation, optimised litigation and settlement, and proactive counter-fraud measures can run into the millions. But crucially, as well as saving money, this also contributes to quicker, fairer and more consistent claim journeys and outcomes for the end-customer.

Harness the power of data to create unbeatable services

Another key benefit from adopting a modern claims system is the ability to capitalise on enhanced data and analytics. Data is an asset and key tool in optimising services – yet in most legacy approaches, data and data capture is fragmented across multiple claims and underwriting systems. Much of that data is held in spreadsheets and other unstructured formats, while 'Big Data' is processed manually leading to inefficiencies, quality issues and restricted visibility.

Deploying consistent data capture within a single claims system — and across a group-wide digital ecosystem — creates a single source of truth throughout the lifecycle of a policy through to claim settlement. By capturing structured data wherever possible, with NLP solutions in place when required, Big Data can be fully harnessed with a coherent processing and data management solution. Companies that only use their own data to make decisions are limiting those decisions to their own experiences, when they could be leveraging industry-wide or regional data to customise handling, payments, and resolution.

This results in seamless integration of vast datasets and analytics capabilities which can be used to enhance claims data and deliver actionable insights. The upshot is a greater volume and quality of claims data than ever before, which can be used to assess trend analysis and deliver deeper insights and understanding of claims trends. Meanwhile rich visualisations, configurable service level agreements, and tracking functionality help ensure users provide a consistently high level of service to clients.

Make the transition seamless

Many companies are wary of the time, cost and resources required to upgrade to a next-generation claims system. Historically, change projects have placed a heavy demand on internal IT resources. With modern solutions, the claims division itself has control of basic system configuration and its own system change pipeline. Once a centralised claims system is delivered, only one system will require updating in future, and only one will need to be maintained. 

The result is fast and effective system change, at reduced cost and a faster completion time compared to transformation projects involving multiple systems and teams.

Shift the burden with managed services to bridge the tech gap

A number of insurers are evaluating outsourcing management of their claims systems to drive long-term success. Opting for an outsourced managed service would incur a fee but simultaneously ease the burden on in-house IT resources. By opting for supplier management, consolidating third-party administration panels and pushing for greater internal economies of scale, insurers can enjoy internal savings.

A managed solution means the costly responsibilities of continuous system monitoring, supporting and updating no longer use up in-house resources, while visibility and control are greatly improved through automatically measured KPIs. This in turn helps drive improvements in best practice with every claim. Likewise, continuous communication between a vendor and their outsourced management services allows for changes and upgrades to be quickly adapted and implemented to address a client’s specific needs, and allows for these to be incorporated into future main product releases. 

Using a managed service also allows insurers to access and learn from the knowledge and experiences of the service’s wider customer base – both in implementation and operation. Investment in the latest technology means insurers can bridge the digital gap and work to become an innovation leader with a significant competitive advantage. 

Digital solutions are no longer a ‘nice to have'

As both customers and brokers alike increasingly expect a future where claims are handled digitally, through advanced digital tools – that offer a positive experience and are transparent and fast – the investment in a smart claims solution has never been so pressing yet beneficial for insurers.

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