The insurance industry has been undergoing a digital transformation for the past few years. The majority of attention has focused on three areas–the sales process, customer support, and back office workflow efficiencies. A relatively unaddressed area by this revolution is arguably the more important for one, the claims process. Digital transformation of claims is set to become a prime insurer differentiator in 2019.
The recent history of increased claims volumes from catastrophes, new digital technologies ready to deliver quick savings, and the huge shifts in customer expectations for quick and easy interactions are prompting both carriers and agencies to venture forth into the digital future of this most complex and expensive insurance domain.
What are key drivers of this change?
Venture investment in insurance artificial intelligence and smart automation continues to be high with some carriers launching their own venture funds to get in on the action.
Carriers’ own technical projects and insurtech partnerships are also heating up, which may be a tell-tale sign the industry will face fierce competition for market share that will go beyond pricing. As the number of technology initiatives rises, each part of the insurance business will undergo change. Claims is the most challenging and complex part of the insurance business, so comprehensive claims digital transformation has been piecemeal at best or left for when the technology catches up with the intricacy and varied demands for this core insurance responsibility.
Big data and nimble, advanced analytics
Technology investment and initiatives are feeding the insurance digital transformation pipeline. The industry is also benefiting from the increases in available computing power, advances that are ready to digest the rapidly expanding amounts and variety of data available. Insurers are partnering with insurtech to make better and better business intelligence and automated decision making possible.
The foundations for these systems were being set during 2018. These machine learning systems need time to learn, so those firms launching in 2019 will also have a head start, especially as submissions from customers and the various data sources become less and less structured — with information coming in in various formats and channels.
How does this apply to the specific needs of processing claims? Claims traditionally require adjusters to personally examine reported losses for damage assessment and to determine claim amounts. Technology has now arrived to help automate some of this labor-intensive process. Graphics processing advances permit insurers to offload many damage assessments. Artificial intelligence is capable of instantly analyzing visual digital inputs, and when properly trained, making claim approval decisions and approving payments. Smart automation can also flag suspicious claims that show similarities to other fraudulent claims, more severe or rare claims also can be flagged for human review. Data can be used prospectively to predict losses and risk, and required reporting of claims can someday soon virtually eliminate the need for human intervention. After smart automation becomes common, the traditional methods of handling claims with no longer cut it.
The proliferation of data from monitoring in cars, phones, GPS, homes, when integrated into claims workflows, will let insurers slash time to report, assess, settle and pay claims. Telematics are estimated to be implemented at 70% of insurers by 2020. Offering instantaneous notice of loss events, automated coverage and anti-fraud checks, telematics delivers granular detail of events–impact velocity, braking, cornering, vehicle safety devices activated and used, event location. Integrating this wealth of information with historical collision information and vehicle model performance and collision data, weather information, smart technologies are able to calculate estimates of damages, repair costs and likely liability.
The addition of drones and use of satellite imagery to the insurance industry gathers damage images for analysis by artificial intelligence algorithms help gather and analyze damage estimates more quickly, even for catastrophic events, reducing claim times and giving multiple-dimensional insights into the scope of damages and helping curtail attempts at fraud.
The millennial generation has matured and is the segment now driving market demand. The oldest Millennials are now 38 years old and the dominant force for change in how insurance brands connect with insureds. This generation is pushing agencies and carriers to make insurance chores easy and for insurers to be available whenever the customer needs them, not only during office hours. The claims process is a particular target for improvement. With the rest of life happening in an instant, smartphone image sharing and messaging apps makes a glaring contrast to the way customers have been forced to deal with claims.
Coming on the heels of this generational wave are those newly minted adults who have not been forced to be patient and who look to be able to do everything on the mobile web.
Change brings opportunity instead of disruption
Recent record losses have shown the industry it cannot rely on the old ways of doing business. Forward looking insurers are viewing these new technologies as opportunities to recognize new operational efficiencies and savings at the same time improving policyholder loyalty with better customer experiences with their insurer. In addition to losses spurring insurers to more readily adapt to the marketplace, new entrants into the insurance industry are letting incumbents know others will capitalize on the new technologies to win market share and gain profits.