Sizzle or Fizzle?
Claims implications for emerging technologies
Emerging technologies like artificial intelligence and the Internet of Things are booming, and the pace of change is accelerating with new technological advancements almost daily. That said, will every technology be useful, needed, or practical for every business? How do insurers sort out for themselves which technologies will be a boom and which might be a bust?
Maybe the better questions are what technologies are already booming in claims, and which are positioned for higher impact a little further down the road. The power and potential of these technologies to reshape our daily lives, the workforce, and the business landscape are breathtaking. What we are already seeing is that emerging technologies can enable better customer service, help insurers adapt to the changing customer relationship, increase their efficiency, and prepare for how claims will operate in the business models of the future.
At the end of the day, claims is and will be about delivering a superior customer experience. However, what that entails is changing. Changing customer expectations are driving insurers to respond by providing more transparency, shorter timelines, and customer-centric behaviors. Greater operational efficiency is essential to meeting these goals.
Insurers also face a unique challenge. Customers are expecting more from their claims experience, influenced by what they have seen in more digitally driven industries as well as the availability of new technology. At the same time, a major wave of retirements is threatening insurers’ time-honored ways of providing that experience.
Technology can help insurers meet these challenges, and emerging technologies, including drones and driverless vehicles, hold particular promise. They can enable fundamental transformation in the frequency and nature of insurers’ interactions with their customers and other stakeholders in the claims lifecycle.
The Changing Face of Claims
Claims is shifting from a strictly reactive operation to a proactive model based on value-added services. There are three distinct elements of claims: restoration, mitigation, and prevention. How insurers balance them is shifting, too, but claims transformation will require the strengthening of all three elements. Figure One shows how restoration, mitigation, and prevention can all be strengthened by different technology applications.
Claims’ traditional focus has been on the restoration of an asset or its value after a loss occurs. The claims process and associated services that fall under restoration are expanding into new areas to change customers’ ideas of what insurers can do for them and how they can expect to be treated when they experience a loss.
Insurers are furthering mitigation, which has long been a topic of discussion but is now coming into sharper focus. This is where insurers can deliver better value to the customer and, at the same time, improve their claims ratios by reducing the severity of a loss. Smaller losses make for happier policyholders—and more attractive claims ratios make for happier claims executives.
Insurers are also pushing the boundaries of what claims can do by exploring loss prevention, seeking to preclude a claim before it even arises. Here, insurers are redefining not only the claims process, but also what they provide to their policyholders and what their mutual relationship looks like. New technologies and data have made advances in this area possible. But more importantly, progress in this area comes from insurers that are reexamining their basic vision of claims. Restoration and mitigation may be prevalent at the moment, but it is prevention that promises the biggest changes to insurers’ business models and consumers’ perception of the industry.
There are 13 emerging technologies that Strategy Meets Action has identified with high potential to change how insurers do business. As illustrated in Figure Two, some are physical (like drones), and others are virtual (like artificial intelligence). But all, to greater or lesser degrees, have the potential to impact claims.
The claims arena is already leveraging a number of these technologies. Experience with the use of drones for catastrophe as well as non-catastrophe claims is growing. Insurers have long used earlier forms of AI for fraud detection, and they are eager to apply more advanced AI technologies to this area, given the magnitude and complexity of the problem. Less-developed technologies, like virtual/augmented reality, are beginning to deliver in certain parts of the claims process, as well.
These and other new technologies are providing insurers with opportunities to innovate in all three elements of claims by enabling insurers to reinvent their business models to predict rather than detect, to alert rather than react, and to prevent rather than restore.
Claims professionals benefit from technologies that allow them to do their jobs better and more safely. Drones and aerial imaging help claims professionals assess dangerous situations from a safe distance, such as after a catastrophic event. They provide a cost-effective way to supplement human inspectors for crops and roof inspections, as well. Drone usage across the industry is increasing.
Wearable devices give claims professionals a novel way to collaborate. Less-experienced field claims professionals can be sent on-site with the ability to collaborate remotely with a more experienced claims professional who can see what they see and provide guidance. Junior staff can learn on the job, while senior staff are spared excessive travel, allowing them to work with many different claims professionals in many different locations simultaneously.
New payment technologies offer insurers more options for how to make payments to claimants and provider networks. Insurers are already experimenting with both text pay and Facebook Messenger.
Insurers like Liberty Mutual and Grange Mutual have developed “skills” for Amazon Alexa, offering policyholders the ability to connect with their insurance companies through voice computing, which is one of many new user interaction technologies. First notice of loss and the status of a claim are a clear extension of these skills.
Chatbots and voice computing depend on natural language processing, a type of artificial intelligence (AI). Other technologies that fall under the AI umbrella, like robotic process automation and machine learning, can streamline and automate operations to potentially shrink claims timelines.
The Internet of Things (IoT) and new sensor technologies have especially high potential in this area. Smart IoT devices of all shapes and sizes enable the early detection of damage or danger. One recent example is leakSMART, a water leak detection device that alerts the policyholder and the insurance company when a leak is detected to stop water damage early. The Nest Protect smoke and carbon monoxide alarm works on the same principle. Similar devices exist for imminently dangerous situations, such as an unattended stove left on in an empty house.
Technology-assisted safety will have a real impact in claims. Driverless vehicles have been widely discussed, especially as passenger vehicles. But autonomous commercial vehicles hold just as much potential to transform the transportation industry, possibly on a shorter timeline. Driverless trucks are now testing on the road in Europe.
There are huge applications for various emerging technologies in fighting fraud. The implications for AI, in particular, are incredible. AI consists of a family of technologies, including machine learning, natural language processing, data/text mining, cognitive computing, and others. Text mining can extract unstructured data from claims notes and other documents, giving insurance a powerful new view into its existing knowledge base. In addition, AI-driven text readers can help inexperienced claims professionals review contracts by narrowing the scope to the most important terms and conditions.
Wearable devices can literally save lives. One recent application is a wearable device that can be worn in the water by children or poor swimmers. The device detects when the swimmer is beginning to struggle, and it sends an unmistakable alert to lifeguards and parents, helping to prevent drowning or medical emergencies.
Drones, too, have lifesaving potential. In January 2018, a drone was used to rescue two teenage boys in danger of drowning off an Australian beach by delivering a flotation device minutes quicker than it would have taken for a lifeguard to get there.
Why Emerging Technologies Matter
It is important to understand that the deployment of emerging technologies and the changes that they can enable will not lessen the role of the claims professional. Both will be critical to improve the claims experience—and most effective if working in harmony.
Drones, AI, and the IoT are already being put to diverse uses to support restoration, mitigation, and even prevention in claims. These booming technologies are only the first wave. New technologies for user interaction and payment methods are on the rise. We expect to see more uses for wearable devices and driverless vehicles over the next three years. Further improvements in customer service and operational efficiency wait in the still-evolving technologies of gamification, virtual/augmented reality, advanced robotics, blockchain, biotechnology, and 3-D printing.
What every claims professional—and every insurer—needs to know is that emerging technologies are here. They are changing what claims means within insurance today. The question is not whether they will boom or bust. It’s how big the boom will be and how soon each technology will have a significant impact on claims transformation.