The global insurance market faces a myriad of challenges, from increasing customer expectations, to rising inflation, climate change, cyber security risk and ‘act of God’ events like pandemics. Few insurers will be unaffected by these challenges in the next five to 10 years and the industry needs to future-proof in order to meet these challenges. Historically, insurance companies have been organised around insurance lines, but increasingly companies are fundamentally re-thinking organisational structures to build resilience, and better adapt to unexpected events. A new approach is emerging, built around customer expectations, rather than insurance lines. This approach requires a radical shift and will see claims handlers trained across all insurance lines. In future, claims handlers will be customer-focused rather than insurance-line-focused. This could only be done after reducing the administrative burden that claims handlers face every day through AI and automation, enabling handlers to focus on what really matters – the customer.

Building resilience to global crises

We know from speaking to our customers that the pandemic has had a far-reaching impact on health insurance lines. Claims volumes increased by 40–60 per cent and have not fallen since. This sharp increase has been driven not just by initial infections, but the knock-on effect of the pandemic on other long-term health conditions. Given that it typically takes six to nine months to train claims handlers – a long and expensive process – it’s critically important to embrace technology to build resilience and streamline this process, should we face another global health crisis. 

Artificial intelligence (AI) inevitably has a major role to play in managing spikes in claims volumes. Deep learning and other AI techniques allow the automation of processes, reducing the time this takes from days and minutes to seconds. With effective use of AI, many decision-making processes in insurance can be automated or assisted by software. Understanding the circumstances that led to a customers’ insurance claim and crossreferencing this with the terms of the current insurance policy is a complex task that can now be automated.

A new approach is emerging, built around customer expectations, rather than insurance lines

Technologies such as AI affords the industry the opportunity to massively increase capacity and focus on the delivery of high-quality customer service. This, combined with training of claims handlers across all lines and a customer-centric approach, will give insurers a degree of insulation from unpredictable events that impact the bottom line, such as the cold snap in December last year that drove a surge in home and commercial insurance claims.

Navigating inflation and the cost of living crisis

Looking beyond the Covid-19 pandemic, there are other pressing issues for the insurance industry. Inflation is arguably one of the greatest threats: by driving up costs for insurers’ claims payouts, prices of goods, repairs and services go up. Premiums take time to catch up with rising costs, resulting in lower profits and even sometimes losses for insurers.

Insurers will need to look closely at overheads and find new ways to optimise operations in the face of these strong headwinds. It’s a balance, as they’ll need to be careful with increases in premium prices, which could have an adverse effect on customers, posing the threat of customer churn from those feeling the bite of cost of living rises. As a result, customers may decide to switch to a cheaper alternative, if one exists. If not, many are faced with the decision of not renewing policies at all, putting themselves, those around them, and their property at risk.

New players in the market have agility on their side. Direct-to-consumer insurtechs are well positioned to absorb and meet these challenges, whereas legacy insurers are considerably more vulnerable. Customers will increasingly favour these disruptive companies, that are able to offer them greater choice and better customer service.

Customer centricity is here to stay

Today, the majority of insurers structure their operations by insurance lines. For customers, this is highly inefficient, with customers frequently holding multiple policies, from multiple different insurance lines. This becomes even more protracted and problematic at the point of claim if the customer needs to claim on more than one type of insurance.

In November 2022, Sprout.ai, in conjunction with CitizenMe, conducted a survey of 1,000 consumers that were either solely responsible for choosing and purchasing insurance products, or made decisions jointly with a member of their household. The data shows more than one in five (21 per cent) insurance customers expect claims to be resolved within hours, highlighting the disparity between consumer expectations of insurance claims and the reality ‘on the ground’.

By improving these efficiencies in the claims process, insurers will reduce stress associated with filing and insurance claims, enhance the overall customer experience, and ultimately improve their bottom line.