Insurtech Review | May 2019
What are the benefits to travel insurers of implementing digital claims – and are they ready to make the transition to fully embrace the realms of new technology? Lauren Haigh spoke to industry experts to find out
We are in a digital age where more and more processes are automated, and technology is advancing at an accelerating pace. Robots are no longer restricted to the world of science fiction; they are very real and all around us, not necessarily appearing as fully formed humanoids, but rather as special-purpose tools that are facilitating tasks and improving quality of life. Think less RoboCop and more Tesla.
Insurance is one industry that automation and digitisation are penetrating rapidly, particularly in the area of claims. Claims processing is the cornerstone of any insurance business and its digitisation is enabling the industry to streamline the claims process in ways that were previously unimaginable.
The key benefits for insurers are reduced claims management costs, which in turn helps to keep premiums as low as possible, and more accurate, speedy customer processes
Now, forgive me for saying this, but I think we can agree that travel insurance is not what necessarily comes to mind when one thinks of the terms ‘futuristic’ and ‘modern’. And, indeed, much claims processing in today’s insurance space is carried out manually. However, there are insurers who are integrating automated claims processing into their businesses and discovering the efficiency and accuracy it affords, not to mention the improved customer satisfaction that comes from speeding up claims handling. ITIJ spoke to a number of industry experts to obtain their professional thoughts on the benefits of digital transformations in claims for the industry – insurers and consumers alike – as well as the potential challenges.
AI in claims automation
Joe Benson is North America Claims Offering Manager at DXC Technology, a US-based B2B multinational corporation that specialises in delivering end-to-end information technology services and digital transformative solutions for large and mid-scale global organisations. He provided ITIJ with an insight into how technologies are being harnessed in claims automation: “Insurers are using automation and artificial intelligence in claims processing to improve operational efficiency and offer a modern customer experience that meets today’s consumer expectations.” He went on to highlight the ways in which this is improving the customer experience, for example implementing AI-enabled conversational assistance and speech-to-text capabilities to provide customers with a self-service option. “Customers can easily view or retrieve copies of their policies, make payments, submit photos for home inspections and initiate first notice of loss claims with no or little assistance from a representative,” he explained.
Consumers increasingly expect results, including claims outcomes, in nearly real time. Digitalisation and automation support our efforts to meet and exceed those expectations
Jeff Rolander, Director of Claims at Allianz Partners, also discussed the use of AI in the claims process, which is something that the company has been considering. “Allianz Partners is exploring several different technologies in our efforts to further enhance the claims experience for our customers,” he said. “AI is an exciting transformative tool that can make fast and accurate claims decisions when using structured data – supplied by either the customer via an online filing or by using a tool like optical character recognition.” Rolander also highlighted some of the tasks that robots are being used to perform, including repetitive but necessary tasks within the claims process: “This includes, for example, running the address verification tool we use to ensure we have accurate addresses for our customers.”
Automated claims could be seen throughout the insurance landscape in future years. For example, Renaud Million, CEO of SPIXII in the UK, said in a recent article on Insurance Nexus that we will first see automated claims in the travel insurance industry: “Imagine that – thanks to data – a machine knows in real time when a claim is going to be made. In connected homes, should a camera see a house get burgled while you’re on holiday, it could process the payment – paper-free – with no interaction between the policyholder and claim support. This would completely transform the claiming experience.”
Importantly, digital transformations in claims have the potential to help insurers and consumers save on costs, as Matt Cullen, Head of Strategy, Data and Analytics at the Association of British Insurers (ABI), explained: “The key benefits for insurers are reduced claims management costs, which in turn helps to keep premiums as low as possible, and more accurate, speedy customer processes – positive experiences that can help drive reputation and loyalty.”
In addition to reducing the costs that are associated with policy servicing and enabling insurers to offer 24/7 service to customers without incurring the costs of operating a contact centre, Benson highlighted further areas that digital transformation in claims is benefiting insurers. “Using AI to initiate transactions and answer simple, high-volume requests and medium-complexity requests frees up customer service representatives (CSRs), agents, analysts and adjusters to address more complex, higher-value tasks,” he explained. “Optimising the customer experience enables insurance companies to establish deeper relationships with policyholders, which can prove to be more enduring and valuable in the long term. CSRs can experience reduced training time to be self-sufficient, reduced attrition and improved confidence levels, all of which lead to increasing customer satisfaction in a competitive environment.” Not only does the use of AI afford employees within the travel insurance sector time to focus on more complex tasks, it also enhances the relationship between insurers and their customers.
Claims processing is the cornerstone of any insurance business
For customers, there are benefits beyond a faster and easier claims process, as Benson highlighted: “Consumers can enjoy an improved overall claims experience. Through the power of AI and automation, insurers can reduce average claims-handling times from weeks to hours. Additionally, customers can use self-service options to initiate and check the status of their claims 24 hours a day, seven days a week, using voice or online and mobile applications. This visibility and access to status updates provides flexibility and is empowering for customers.”
Muir Robertson, Managing Director at assistance, travel risk and claims management provider CEGA in the UK, further emphasises the positive response from customers. “Digital developments such as automated claims have helped to increase the number of written compliments we receive from customers and improve customer satisfaction scores.”
An additional advantage to digitising claims processing is that modernising core claims systems can help insurers to build strategies around risk prevention and mitigation. “AI-enabled fraud detection software combines predictive data modelling technology, identity search technologies, fraud indicator business rules, company claims information and industry data sources to help flag suspicious claims as early as the first notice of loss,” said Benson. “Additionally, insurers can use the fraud score to alter or influence the classification and assignment of submitted claims.”
It sounds like a win-win situation, with digital transformations in claims benefiting both insurers and their customers. But are there any challenges associated with implementing these processes?
Cullen explained to ITIJ that challenges will vary based on the type of technology being used. “An overarching challenge for insurers may be integrating new approaches with legacy systems that could be many years old, or integrating consistent approaches across a variety of books of business or distribution channels,” he said. That is to say that many insurers are using systems that have been around for a long time and may not be ready or able to convert these systems to more digital approaches.
Benson agrees that this could prove challenging: “Many carriers have traditional systems that may not be ready to interact with new digital platforms. After years of pondering how to erase their large, legacy IT debt, insurers are realising they must develop the kind of digital infrastructure that’s needed to support new digital initiatives.” However, he believes that there is a lot to be gained from making the transition to digital. “Insurers are embracing a dual agenda,” he said, “optimising value from existing systems while advancing toward an open platform of components and services. Embracing a digital platform enables insurers to shift their focus and investments from building and maintaining to integrating and aggregating.”
In a similar vein, customers may also not necessarily be willing or able to adapt, as Cullen highlighted: “A key issue is for the industry to ensure that it still effectively serves customers who may not be keen, or able, to engage with digital approaches. For example, it might not be ideal if chatbot/app-based claim notification became so dominant that traditional phone-based approaches began to be taken out of service.”
Robertson reinforces this point: “It’s important to use automation as part of an end-to-end claims solution that retains the human touch and does not disadvantage policyholders who want to submit claims to a human being, at any time of the day or night.”
A key issue is for the industry to ensure that it still effectively serves customers who may not be keen, or able, to engage with digital approaches
Therefore, it is important to strike a balance between implementing new digital systems that can improve the customer experience, and ensuring that customers who wish to use more traditional methods for making claims can still do so and aren’t disrupted. As such, insurers are able to ensure that they keep the consumer happy.
Another potential challenge that Rolander pointed out is that the start-up costs for these types of systems can be substantial. In addition, he agreed that the consumer could be burdened by the need to provide digital claims data and this is clearly to be avoided: “The primary challenge is finding ways to obtain structured / digital claims data (for example, a doctor’s note supporting the need to cancel a trip) from the customer with minimal inconvenience. Tools like online filing and optical character recognition can help bridge this gap.”
An additional challenge Benson discussed with ITIJ is the need for insurers to invest in the right companies. “Insurance companies are also increasingly looking to insurtech to add new digital capabilities. The challenge will be for insurers to vet the companies they want to invest time and energy in to ensure that they can combine the new capabilities with what drives the current business value chain, and that the resulting business model will be sustainable,” he said. “A digital platform is key to solving both of those challenges. Recognising the power of open collaboration with new industry players, DXC is actively interacting in the insurtech market, vetting companies to engage with and curating a digital ecosystem for our clients.”
Mitigating digital disruption
Despite the potential challenges associated with consumers transitioning to claiming digitally, the benefits are numerous and, as Benson emphasised, customers have made it clear that they want a digital environment in which they can manage their claims online and quickly get accurate and consistent responses from digitally enabled companies. As long as disruption to the consumer is mitigated, there should not be a problem.
Robertson stated: “Claims automation enables insurers to offer customers more choice, more control and more convenience, transforming customer service.”
Rolander agrees, and pointed out that digitalisation can help meet customer expectations: “Consumers increasingly expect results, including claims outcomes, in nearly real time. Digitalisation and automation support our efforts to meet and exceed those expectations.” He believes that digital is at the forefront of insurers’ minds and has benefits for insurers and consumers alike: “They want to reap the benefits of improved agility and cost savings from IT modernisation. They also realise millennials and the next generation of policyholders will prefer to engage with more modern digital platforms.”
It sounds like the benefits of digitising the claims process outweigh any potential challenges. Not only can insurers ultimately reap cost savings, they can strengthen their relationships with policyholders and free up their employees to complete more complex tasks. Although the move to new technologies can be onerous, requiring insurance companies to transform their processes, the potential payoff is significant. Insurers have a lot to gain from moving into the realm of insurtech.
Indeed, Benson believes that this transition is crucial for insurers: “Transformation is imperative for insurers, or they risk getting left behind.”
Whether the industry likes it or not, change is inevitable, and automation looks set to change the future of claiming. Insurers must adapt in order to remain competitive.