My last five columns were all about the claim process—what it consists of, how
the elements work together, and why these elements are the journey to the
endgame—a rapid, least-cost claim resolution. I would add that, while fairness
for all parties may not be the goal of all claim professionals, it is the right
thing to do.
Sadly, these elements have been the same for all my 30-plus year career, and
I think I can safely say that they've been the same for the preceding
decades when claim management as a profession developed the most and gained
traction as critical to insurer (and self-insurer) performance. And that, my
friends, is the problem. Namely, too many practitioners' execution of claim
processes remains much the same as since its inception, or at least from the
mid-twentieth century forward.
The Growth of Insurance Claims Technology
Enter insurance industry disruption, enabled by capital looking for better
returns and seeing the industry as ripe for the picking. This disruption is
being catalyzed by insurtech. This "movement" within the technology
world is populated by an abundance of insurance-focused start-ups, whose
missions are typically to develop technology solutions that will dramatically
improve insurance-related functions, like claims, and ultimately the
performance of insurers, self-insurers, and other industry players. Their focus
is on efficiency, speed, and expense reduction as the outcomes sought in future
operations.
While, to date, most of this activity has not been focused on claim
processes (over 50 percent is focused on front-end services and only 10 percent
on claims) there is a growing recognition that, from an opportunity standpoint,
the adage that "It's the claims, stupid!" may well be true in
this realm. Insurtech pundits suggest that the biggest changes to come from
this movement are insurance companies shifting to innovations related to
detection, prevention, and managing of risk, with specific emphasis on
losses.
Striving for Seamlessness
It's appropriate to remember that claims are the biggest part of the
cost of risk, the biggest part of an insurer's and self-insurer's
operation, and thus the biggest target of opportunity for stakeholders. Can we
agree that having a seamless claim process is a must for all stakeholder
organizations? In fact, for those same stakeholders, having an end-to-end
seamless customer/claimant experience is the ultimate goal of the claims
industry. There is no doubt that this drives many targeted performance
outcomes, not the least of which is a profitable enterprise.
The insurtech movement has revealed the following two important things to
industry stakeholders.
- Customers'/claimants' expectations are evolving such that they
want continuously improving experiences with all companies with which they
interact, and they expect that their next experience will be better than
their last.
- There are regularly emerging technologies focused on helping companies
fulfill those expectations.
According to Stephen Applebaum, a partner at the Insurance Solutions Group,
the endgame paradigm for stakeholders in the claim world (and thus the focus of
future insurtech claim innovation) is to achieve the following.
- Seamless and touchless claims
- A compressed claims cycle
- Significant costs reduction
- Delivery of superior customer claims experiences
I would suggest that these are the attributes of a high-performance claim
management model and should be sought after by all practitioners. The natural
question is how this may be achieved. The answer suggests that using
intermediaries, alliances, and partnerships to connect Internet of Things
devices, sensors, and handheld devices for the smooth and speedy
transmission of data and information to the various players in the claim
process is the method involved.
The next question is who are the stakeholders, and the answer is virtually
the entire insurance ecosystem. That ecosystem includes those who embrace
customers, partners, and even the entire industry supply chain. In the claim
management world alone, the stakeholders are numerous and varied—think
adjusters, nurses, regulators, data providers, pharmacy benefit managers, and
rehabilitation and other specialists.
Next, what aspects of the industry will be touched by this activity? Of
course, first and foremost, its people will as well as claimants, customers,
vendors, adjusters, and even the families and communities affected by
accidents/claims. Clearly, at least as it relates to the claim function,
it's people who stand to gain the most from claim process innovation. But
other intersects occur as well with vehicles, lives, reputations, business
continuity, inventory, real property, machines, data, etc. In a loose sense, a
wide variety of and many aspects of daily life.
Lastly, we're talking about time. The highest performing claim function
should enable service every hour of every day throughout the year. We've
made great strides in this direction, but true "anytime" service is
what the customer will ultimately demand. Insurtech is sure to get us
there.
Examples of Insurtech and Claims
So, what are some examples of how insurtech may affect the claim management
function? The following are a few.
- Telematics applied to personal and commercial autos/trucks to detect when
a vehicle has been in an accident—prompting an outbound call to a claim
professional enabling a near-immediate response
- Immediate capture of damages: videos (e.g., live streaming) and drones
are being used so that adjusters don't need to go to the scene to capture
evidence before spoliation, except by exception
- Artificial intelligence capabilities to assess damages more accurately
and reliably
- Chatbots to interact with the customers/claimants when personal contact
is not required for effectiveness
The Future of Insurtech
The insurtech movement is still in its infancy. The claim management aspect
of this movement is even younger with tremendous potential to have some of the
biggest impacts on the performance of the industry. The following are a few
trends that you can expect to see that will affect both.
- Increasing speed of data availability even in real time
- Increasing breadth and depth of exposure data quality that, when aligned
with loss data, enables a complete view into risk profile, facilitating
better prevention and control tactics
- Declining cost of more robust tech tools that will allow more
stakeholders of all types to be more effective and to contribute at higher,
more strategic levels more effectively
- Reduced regulatory burden as regulators get more comfortable with the way
particularly large risk-bearing entities manage risk
- Increasing data privacy challenges as more potentially sensitive
personally identifiable information are available to more stakeholders and,
as a result, is more exposed to access by bad actors
- Insurtech evolving into "risktech" where risk solutions
unrelated to insurance become an increasing focus of practitioners and
hopefully the innovators
- Eventual complete digitization of the risk profile, forcing risk
practitioners to broaden their skill set to areas outside their comfort zones
(e.g., technology)
- More investment in claim data collection and analysis tools focused on
the "endgame paradigm" referenced above
- Increasing transparency among stakeholders and, ultimately, the declining
cost of risk in more traditional exposure areas (e.g., workers compensation
and the potentially increasing cost of risk in emerging exposure areas
(unclear how that will net out), which is another opportunity for insurtech
to get ahead of this exposure)
- Increasing formation of alliances and coalitions among stakeholders with
common interests wanting to leverage each other's expertise and resources
for mutual benefit
These trends will radically change the insurance industry and ensure the
claim function is positioned to benefit. They will change all
practitioner's lives, the way they work, what their priorities are, and how
the jobs of the future will be defined. Are you ready? Buckle up!