A Digital Dream No More
The key to satisfying connected consumers is becoming reality
The connected consumers of 2018 have vastly different brand expectations than they did even four years ago, when mobile surpassed fixed internet usage worldwide. A new playing field has been set by disruptive firms that forge connections at the touch of a screen and fine-tune relationships based on users’ locations, interests, and behaviors. Consider the hospitality industry’s innovators: Airbnb’s bookings are expected to climb to a billion nights per year by 2025. Uber has surpassed 5 billion rides. And food delivery leader GrubHub has 8.75 million active users to match its soaring profits.
A transformation in insurance is also underway. We’ve ridden out the price wars and the shift in distribution channels from agent to online purchases. Now the focus is on reimagining claims. When connected consumers experience a loss, they expect to experience the same ease and speed they receive from the rest of the virtual marketplace. Insurers that deliver anything less will see client drop-off, with brand loyalty becoming as scarce as flip phones. But carriers that provide top claims experiences will be rewarded with competitive advantages in both retention and word-of-mouth gains. Consumers win from start to finish.
Satisfying connected consumers requires a sea change that will upend traditional claims processing as we know it. Forget high human touch and claims that take months, weeks, or even days to resolve. Insurers need to shake up traditional structures to digitize claims functions. But we’ve got to overcome a number of obstacles on the way to achieving that goal.
With more than $600 billion in premiums in 2016, the property and casualty industry is a behemoth that will require more regeneration than simply building an app or creating an online portal. But implementing large-scale change can feel impossible. According to KPMG, 74 percent of insurers report lacking the internal core skills necessary to drive innovation, and 79 percent say they are barely keeping up with day-to-day tasks. Outdated organizational structures and workflows certainly inhibit digitization. But the advantages of making the move are clear, with 48 percent of insurance executives reporting that they are already being disrupted by new, more nimble competitors.
Managing the Deluge of Data
When it comes to settling claims fast enough to satisfy today’s consumers, insurers must decide in fractions of a second whether a claim is meritorious. But making instant claims decisions depends on wading through massive amounts of data from multiple sources, including loss histories; vehicle information; prior special investigation unit (SIU) involvement; and hundreds of other data points.
The nearly limitless data-crunching capacity of cloud computing can help insurers manage overwhelming volumes of information. Network World says that cloud computing is becoming a de facto part of doing business—with exponential growth anticipated. And a 2016 Cisco survey estimates that global cloud storage capacity will reach 600 exabytes (each EB being one quintillion bytes) in 2017.
But it’s one thing to manage data—it’s another to derive insights from it. And that’s what insurers need most.
One of the most basic steps in evaluating claims is determining if they are legitimate losses. Traditional fraud detection has consisted of claims professionals manually sifting through details to spot questionable claims and referring those cases to SIU. This labor-intensive process has been both inefficient and inconsistent. Homegrown fraud-checking technology can help, but according to the Coalition Against Insurance Fraud, two of the biggest challenges insurers face in fraud detection are a lack of IT resources to maintain and expand programs, and excessive false positives.
However, insurers can avail themselves of automated fraud-checking systems that process large amounts of data right at the point of claim. These systems are powered by predictive analytics that can triage claims based on company-specific rules and thresholds. When such checks are in place, the majority of losses can be fast-tracked for near-instant claims decisions. For claims that need to be analyzed further, the systems provide deep insights based on which rules were triggered, guiding further investigation.
Customers Become Collaborators—But Be Wary
One of the unexpected benefits of digitizing claims intake is that it gives customers a genuine role in helping process their own claims. When a loss occurs, policyholders can download an app that will allow them to stream video or send photos directly to their claims professional. This technology lets claims professionals start as early as first notice of loss, skipping the days-long process of waiting for field claims professionals to schedule on-site visits (which is both frustrating to the insured and costly to the insurer). Mobile collaboration not only saves time, but also it engages customers in a way that extends their participation in the connected marketplace, where 95 million photos and videos are shared on Instagram every day.
Yet, the faster that claims are processed, the easier it can be for unscrupulous individuals to commit fraud. But, once again, new technology is helping. Advanced image forensics can spot digital photo manipulation to ensure that reported damage is legitimate. For property losses, aerial and drone technologies are being employed to confirm damage. This has proven exceptionally valuable in wide-scale catastrophes in which claims professionals may not be able to reach loss locations due to closed roads or flooding. With loss reporting verified, claims professionals often can move the claim directly to settlement.
When Decisions Go Digital
Processing claims with utmost efficiency requires consistent and accurate decision-making. The rapid-fire advancements made possible by artificial intelligence (AI) can improve decisions faster than ever before. A 2015 survey by Tech Pro Research found that 24 percent of businesses across industries were currently using AI or planning to use it in the next year, and that number is likely to be higher today. Now, insurers are joining other top industries that are turning to AI.
For example, claimant photos of auto physical damage can be analyzed with systems that combine advanced imaging technologies with artificial neural networks. These systems assess damage level, quickly determining if a vehicle can be repaired or if it is a total loss. With the incorporation of repair pricing and a database of replacement parts, these systems can automatically determine settlement amounts. Checks can be cut more quickly, and customers don’t need to take time to visit body shops for estimates. Getting cars repaired and customers back on the road faster are additional benefits of digital claims processes.
While insurers have clear incentives to digitize claims to meet connected consumers’ expectations and strengthen efficiencies, there is yet another benefit to making the switch. Digital processes can help with two thorny human resources challenges: dealing with the experience gap left by retiring personnel, and retaining the millennial workforce that will replace them.
The mass baby boomer retirement wave is expected to hit insurance particularly hard. According to a report by Jacobson Insurance Talent, 2018 is the year that 25 percent of the industry’s workforce will be eligible for or near retirement, with 400,000 insurance vacancies likely by 2020.
And these aren’t entry-level job openings; they will be for hard-to-replace senior staff. Digital claims systems that draw upon technologies such as AI, machine learning, and predictive analytics are planned to boost the capacity and elevate the decision-making skills of the claims team that is left to carry the load.
For example, workers compensation claims can be analyzed with a predictive analytics system that can generally determine if a claim will be high severity right from first report of injury. Such determinations used to be the purview of the most senior claims managers. Now, personnel with significantly less experience will be empowered to achieve better managed claims outcomes.
As for recruitment, it’s no secret that insurance isn’t viewed as the most attractive career choice for today’s college graduates. A Microsoft study reported that 93 percent of millennials say that the latest technology is important in choosing an employer. A cubicle full of legacy software just isn’t going to cut it for 20-somethings. But with InsurTech splintering off from FinTech, our industry is riding its own digital technology wave, reinventing the look and feel of the very work we do. This can only benefit our efforts to recruit a young workforce that can bring tech savviness to the claims space.
The Time Is Now
The evidence is clear that digital claims are the answer to multiple challenges—from convincing connected consumers to renew their policies, to overcoming information overload, to managing the coming brain drain of retirees, to recruiting a new workforce. The benefits for consumers are also manifold, ranging from better service options, to faster settlement checks, to reduced premiums. It’s time for insurers to leave manual processes behind and embrace the faster, more consistent, and more engaging world of digital claims processing.