This article from Jeremy Lefebure of PwC, discusses how digital transformation will help change the insurance claim business model. Not only will it improve the claimers experience it will also help reduce the number of overall claims.
This is another strong demonstration of how going digital can add value to your business.
Claims are not just an insurers’ biggest expense - they’re also the crucial moment that matters for customers. If handled badly, they’ll switch to a competitor, and potentially tell others about their experience. That’s why the latest data and digital advances in claims management could prove to be a critical differentiator, combining the win-win of lower claims costs and a more compelling claims offering for the customer.
So how can digital transform claims? The immediate wins are convenience, personalisation and speed. For example, a new generation of sensors and connected devices can initiate the claims process instantaneously. In a car accident, the in-car sensor could record the impact speed and location, while a smartphone App would help capture third party details and damage on the scene, enabling the right settlement to be organised straight away.
We’re also seeing a big leap forward in options for customer segmentation, as behavioural analytics, pattern recognition and other fast-developing techniques enable insurers to quickly screen for fraud risks as well as identify situations, such as vulnerable customers, who are likely to require special attention. Further helpful developments include predictive models that can set benchmarks for likely outcomes based on a batch of similar claims. It’s then possible to better manage expectations, as well as compare the results against actual experience to detect signs of leakage.
Changing the business model
Yet, in many ways this is only the beginning. The real shift in the insurance business model is going to come from the role digital plays in understanding and mitigating risks, thus avoiding a good number of claims altogether. For example, vehicle and property sensors not only enable insurers to determine real-time risk exposure, but can also encourage safer driving and help identify accidents waiting to happen. Similarly, wearable health sensors used in the new generation of life and health cover can help to promote healthier lifestyles and alert policyholders to the need for prompt medical attention. Crucially, these developments are moving insurance from a transactional relationship to a continuous and valued engagement with policyholders.
Setting the pace
Realising this potential is challenging - demonstrated by the huge lag between the market leaders and followers.
Many of the front-runners are new start-ups or ‘greenfield’ operations, who have the advantage of being able to build a digital claims process from scratch. For routine claims, customers benefit from a fast and straightforward process, while the insurer is able to run the operation with fewer people and at lower costs than their conventional counterparts. Greater process automation for routine claims allows claims professionals to focus on the difficult cases, while next generation artificial intelligence (AI) can help them to make smarter choices and serve customers better than ever before.
At the other end of the spectrum, many insurers are coming up against slow and unwieldy legacy systems and ingrained ways of working. But they can catch up fast, and we’re seeing innovative transformation approaches that seek to play the digital start-ups and disruptors at their own game. For example, cloud technology allows firms to scale up without high fixed costs, and an agile delivery culture helps them get up and running, gain feedback and quickly respond.
So what can you do?
1) Get to market quickly
Rather than waiting for the whole organisation to change, the latest digital technology allows new claims management capabilities to be quickly and cheaply set up from scratch.
2) Start small, learn fast and, if needs be, fail fast
Pilots or ‘greenfield’ operations could be launched, tested, adapted and rolled out more widely in line with customer outcomes and savings generated. If it doesn’t work, the business can discard, learn from what went wrong and aim to get it right next time.
3) Greater flexibility and reduced execution risk
The test and learn approach would allow much greater flexibility and room for innovation on the one side, while reducing the costs, design and execution risks of big investment projects on the other.
Taking engagement and value to a new level
Achieving claims excellence is one of the most visible and impactful things an insurer can do. More responsive claims management, tailored to meet the needs and expectations of different market segments, would certainly help to foster new ways of working and engaging with customers. Helping families and businesses to reduce the risks they face, and supporting them more effectively if they do run into trouble, would vastly increase how customers view the value of what insurers offer. If the insurance industry fails to rise to the challenge, someone else will.