Full claims automation is not science fiction

Full claims automation is not science fiction

Forrester reports that insurance companies have invested heavily in the digital transformation of the claims process, introducing a range of self-service capabilities for initial loss observations, settlement and the payment process. Forrester reports that insurance companies have invested heavily in the digital transformation of the claims process, introducing a range of self-service capabilities for initial loss observations, settlement and the payment process. (Photo: Thapana_Studio/Adobe Stock)

Inflation will pose a lasting challenge to the insurance industry, and it is questionable whether insurers will be able to compensate for rising claims costs on the premium side. Insurers need to become more efficient, as automation is developing into one of the significant drivers of success.

The industry is facing a critical period that will have a lasting impact on many companies in the market. AM Best data shows that inflation has already affected the industry in 2021. Increasing losses in motor insurance, medical malpractice and general liability lines have driven the market to an underwriting loss, despite premiums increasing by 9%. In 2022, the situation became worse. The ongoing economic pressure will force insurers to improve their operational processes. Automation will play a central role in this.

Our surveys among insurers show that automation is seen as the most important value driver within the industry. The potential is big in almost all areas of the value chain, from reporting and portfolio management and other back-office functions to sales, asset management and risk management. Around the globe, insurers are launching projects to automate risk analysis, underwriting and pricing, sales management and new business, data management, document management, and actuarial processes such as reserve building.

McKinsey expects that one-fourth of the processes in the insurance industry will be automated by 2025 through the usage of artificial intelligence. However, insurers are still currently focused on core system modernization and their data management capabilities. With the effects of inflation becoming palpable, the industry is likely to concentrate on realizing value over pure infrastructure investments. Therefore, we expect that claims management will soon assume the greatest importance in insurers’ automation efforts. Unlike in sales, insurers can control the process here completely on their own and are not blocked by heterogeneous IT landscapes at external sales partners. By setting up claims platforms, insurers can even develop their own digital ecosystems.

Insurers’ efforts revolve around image recognition, fraud detection & claims payment

Claims management projects are primarily about increasing efficiency. That claims processing is a people-to-people affair is a widespread consensus in the industry. Insurance companies have invested heavily in the digital transformation of the claims process, introducing a range of self-service capabilities for initial loss observations, settlement and the payment process, Forrester reports. However, customers still prefer to deal directly with an employee rather than using these offerings.

From our perspective, the positive effects that automated claims processing has on customer satisfaction are being neglected (See Table 1). Fast response and service 24 hours a day, seven days a week are things customers expect. This desire becomes even stronger when we move from online purchasing to claims service. Without automation, this cannot be achieved.

Human contact prevails in claims notification, but digital claims filing is catching up. Here’s how customers prefer to report their claims. Human contact prevails in claims notification, but digital claims filing is catching up. Here’s how customers prefer to report their claims.

When customers resort to human contact in the event of a claim, it is mainly because the relevant systems are not yet ready. Scandinavian insurers are focusing heavily on claims management. The Norwegian market leader Gjensidige, for example, has announced that it intends to process more than 70% of its claims automatically by 2025. Tryg, the market leader in Denmark, is no less ambitious.

Insurers’ efforts to automate claims processing revolve around things like automated image recognition, fraud detection and claims payment. They are partnering with specialized insurtechs and service providers on individual solutions. In Japan, Tokio Marine and MS & AD are introducing AI-powered claims recognition. Mitsui Sumitomo is digitizing claims processing using Guidewire ClaimCenter. After major catastrophic events, MS & AD plans to use aerial photography for claims verification in the future.

Swiss Re is developing automation solutions for motor claims with its IT subsidiary. In Germany, insurtech Omni:us has developed a digital claims processor that automates low and medium-complexity claims. In the U.S., insurtechs Metromile and Lob have teamed up to automate customer communications and post-claim payments.

Polish insurer has automated the claims process to the greatest extent

By assembling many automated individual solutions for different functionalities, full automation gradually emerges. In Germany, Sollers supports insurers in automating glass claims, simplifying claims notification, document recognition and processing for structured data, redefining business processes and triggering them automatically, automating routing, managing incoming payments and partially automating subrogation. In projects with French insurers, the focus is on the automated creation of claims files, document generation and customer communication.

In the UK, artificial intelligence is being used in claims reporting and fraud prevention. Claims estimates in health insurance are being automated. In Poland, current projects focus on automated claims segmentation, customer information and repair service.

In an ambitious project, Polish insurer Warta has automated its claims process to the greatest possible extent. Actions and decisions in claims processing are handled by algorithms, while humans monitor the process. This brings the insurer closer to the reality of modern production plants. The result is a drastic reduction in workload. At the same time, it accelerates claims processing to the point of real-time claims processing.

Insurers do not achieve all this with a big-bang project, but through continuous work. The important thing is to take a targeted approach, break down claims processing into process blocks and divide them into micro-processes. The goal is to identify and automate the micro-processes with the greatest possible potential. It is often small steps taken by project teams that allow companies to take a big step forward.

MichalTrochimczuk, is the managing partner of Sollers Consulting. Contact him at [email protected].

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