Insurtech and the Claim Function

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!