We live in a digital age where products and services in financial services are more easily consumable and insurance is no different. If you have ever encountered a bad claims experience then the likelihood of you staying with your current insurer is slim and digitization has made it far easier for consumers to easily identify and acquire new insurance products and services; changing your insurer year-on-year is certainly not uncommon these days!
On one hand, insurance transactions are becoming more faceless yet in another, consumers have far greater expectations on insurers and their experience in transacting with them. Consumers are increasingly willing to share more data with insurers to help drive down insurance premiums but in return, they expect greater levels of customer engagement, service and transparency; all at a very competitive price. Add inherent customer disloyalty into the mix and you have a cauldron of dilemmas for most insurers whereas the forward thinking, innovative and digitised insurers know how to leverage this situation to their distinct advantage.
Insurance companies and third-party claims management specialists process and manage claims in a variety of ways although there is a growing market expectation that claims that are of low value and complexity are paid quickly whilst at the same time, insurance companies being able to accurately identifying claims that may be fraudulent in nature. Get a claims decision right, and pay the claimant quickly, and you have a happy customer who has a greater propensity to remain loyal for years to include the potential to cross and upsell additional products and services. Many insurers struggle with customer retention let alone growing their customer base and therefore, delivering consistent customer excellence is fundamental to the ongoing success of any insurer.
In order to register, validate and pay claims that are of low value and complexity, insurers have traditionally deployed large scale operations with sizeable claims teams. Over recent years, there has been a bigger move to automate decision making processes and with the increased understanding and application of Artificial Intelligence (AI) capabilities, insurers are tapping into the ‘art of the possible’. Self-service models are now becoming more popular – registering a claim on-line 24/7 and at your convenience is slowly becoming the norm but in doing so, customers have expectations and require a reliable exchange of information digitally to provide them with a level of assurance that 1) they have done all that is asked of them in registering their claim 2) they have immediate and expert human support should the process fail and/or when they need it and 3) their claim is paid promptly and ideally, same day. Insurers should be looking to optimize and simplify all steps and interaction points throughout the claims process to reduce customer effort whilst increasing the success in process completion. AI technologies should be used alongside, and in harmony with, human oversight to ensure that highly trained and specialized teams can deal with claims efficiently and effectively, whether they are straight-through-processed or require more in-depth handling.
Whilst this might sound straight-forward for the insurer, there are a number of pitfalls especially given the number of key decision points. Get it right and they have a satisfied customer and have enhanced their customer retention strategy – get it wrong and not only is there a greater likelihood that the customer will not renew or cancel their policy but further; a complaint could ensue with potential Ombudsman involvement. Not only is getting it wrong hugely time consuming for insures but it’s also costly, inefficient and human-dependent in terms of management and resolution. There’s also the potential to pay claims where fraud was evident but the process failed to identify the risk and/or overwrote the decision making process. Pre-meditated and organized fraudsters know that claims of low value and complexity are (typically) subject to less scrutiny and will therefore exploit any such opportunity and if you add the associated risk of ID theft/manipulation and account takeover then fraudsters stand to benefit significantly.
Another challenge for insurers is their ability to validate and automate the verification of documentation and images. Dependent on the document type submitted in support of a claim, it can take anywhere from up to 2 minutes to simply open, visually scan and save a document. If you multiply that by, on average, 8 documents per claim then that’s 16 minutes spent on just that activity without really being able to robustly validate the legitimacy of the documents. If you multiply that figure by the hundreds of thousands of claims registered with insurers year-on-year then you have a hugely inaccurate, inefficient and labor-intensive process with the increased potential for fraud, waste and abuse.
Similarly with images and, for example, the likelihood of a claims handler/adjuster being able to accurately assess damage compatibility between 2 vehicles involved in a road accident or accidental damage to a Television, then specialists would typically have to be appointed to assess the nature of the damage, which incurs additional cost, time and arguably, customer dissatisfaction.
In providing a fully digital service and experience for consumers then insurers require technology solutions that not only help them automate manually intensive processes and decision making but further, those that complete the validation process and cater for fraud, document and image verification within one platform or service. In doing so, insurers can ‘join the dots’ of the customer journey, fully validate all associated risks and automate rudimentary decisions. The majority of claims should be straight-through-processed whereas those which require human intervention and expertise, are immediately surfaced, and contextualized, for further attention and validation. In the case of suspected fraud then an insurers Special Investigation Unit (SIU) are immediately engaged and provide efficient and expert investigation skills.
The ongoing digital push has also resulted in increasing regulatory scrutiny for insurers and that, coupled with greater data and IT security requirements, is becoming increasingly costly and cumbersome for some insurers to manage. Increased automation will require a heightened level of vigilance and critically, human intervention.
Due to brand acquisition, legacy systems and antiquated IT infrastructures, some insurers are still unable to derive the relevant and differentiating insights from their data and become reliant on third party data consumed at a cost from industry databases, bureaus and other organizations but to what extent is this sustainable. KYC requirements continue to become more onerous in an age where, as mentioned previously, ID theft/manipulation and account takeover continues to add risk and complexity to onboarding processes. During the pandemic, there have been an abundance of phishing and vishing cyber-enabled scams that have stretched even the most robust of IT security estates at a time where many insurers invoked business continuity plans; some of which just weren’t fit for purpose and not only resulted in an increased number of (data) security breaches but claims being paid without the normal level of rigor and due diligence.