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Arthur D. Little has been at the forefront of innovation since 1886. We are an acknowledged thought leader in linking strategy, innovation and transformation in technology-intensive and converging industries. We enable our clients to build innovation capabilities and transform their organizations. ADL is present in the most important business centers around the world. We are proud to serve most of the Fortune 1000 companies, in addition to other leading firms and public sector organizations. For further information, please visit www.adlittle.com

Claims: How customer expectations are driving value chain innovation

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Dealing with a claim is one of the tasks that policyholders dread. As a result, claims has become a critical stage in the insurance digitalisation process and will increasingly be a factor that can make or break a company’s reputation. If claims management, service – or outcomes – consistently fall short of customer expectations, insurers will face an uphill struggle to acquire and retain clients.

The challenge insurers face, is that customer expectations are always changing. This means a strong claims service today could be deemed inadequate tomorrow, making claims a part of the value chain which requires innovation if insurers are to achieve their objectives.

There are also opportunities for insurers to transform processes throughout the entire lifecycle of an insurance claim to not only better serve the customer better, but create value for the business.

All that customers really want?

Customers today expect to be able to report a claim 24-hours a day, seven days a week. Not only do they want to be able to notify of a loss quickly, they want an immediate response from their insurer to confirm the claim has been lodged and will be dealt with.

Reporting their loss requires an omni-channel approach – apps, online, over the phone or via agents/brokers. They also expect communication to be ongoing throughout the lifecycle of a claim.

Customers are only looking for immediate access, constant communication, convenience, speed, and, perhaps most importantly, peace of mind that their loss is being treated as a priority.

Source : Capgemini

Preaching to the choir

Insurers are aware of what customers want from their claims experience in a digital environment and have the tools to help them to meet these expectations.

Technology has been used to enhance client communication throughout the claims process, and many insurers have made progress in their deployment of artificial intelligence (AI) and machine learning (ML).

AI and ML are being used to ‘triage’ claims as claims arrive and then send them along the technology pipeline to the appropriate divisions – whether that’s complex claims or high-volume, low severity teams. This helps insurers speed up the claims adjudication process and meet policyholders’ demands for rapid response times. They really want consumers’ information before they have to seek it. They don’t want to be chasing the insurer because if they are made to feel like a priority, it only improves their customer experience quite apart from the back office elements that may help with fraud.

It’s all about the data

Having the data before a claim has even been made is a key element of the future claims process. It presents the insurer with an opportunity to engage in the moment and provide assistance to the customer, building trust and strengthening the relationship.

Insurers began making inroads into real time/near real time claims handling before the pandemic in some areas such as flight delays, flight cancellation, baggage loss and lost or stolen credit cards. But there were challenges to overcome.

One of the main obstacles was the ability – or not – to make immediate payment on the discovery of a potential claim. Though insurtechs like Imburse were early movers in providing that capability, most customers experienced their flight delay claim being paid out once that had returned home.

Experience has shown that a seamless claim process is not only preferable, but should be attainable. But it was unavoidable that the COVID-19 pandemic focused companies on their internal capabilities to allow them to operate with a remote workforce.

What this should demonstrate to insurers more than anything else is that with the right motivation, change can be made very rapidly.

Embracing change

Technology, like AI, ML and data analytics, is an essential part of good decision making when adjudicating claims. Insurers can – and should – make use of use tools to reach the best possible decision on each and every claim.

The data collected through using technology can also be used to enhance risk management and loss control services. These are components of a broader claim service that should not be overlooked, but those who don’t adopt the tech will rapidly begin to fall behind.

Insurers can also gather claims data from policyholders, using smartphones for geolocation, photo and video collection, particularly for home and auto claims damage.

They can also link customers to ecosystems of related claims services such as professionals who can effect repairs, all guided by chatbots or other technological processes.

While loss adjustment tech has been repurposed for customers to assist with real time data collection, insurers are making use new sources of data to give themselves a better risk picture.

These include satellite data, but also drones and other remote and virtual technology, such as virtual reality.

There are a number of sectors that are pushing to use technology and innovation to improve the claims experience for the benefit of them and their customers.

As mentioned earlier, travel is an area that saw improvements before the pandemic. Travel data is available in real time and speeding up claims for delays or baggage handling problems should be relatively straight forward.

The ability to transfer money digitally across the world at the press of a button should also offer opportunities in the case of the loss or theft of travel money and credit cards. Customers are becoming increasingly comfortable with money apps and will find their whole claims process may be dealt with on their smartphone.

Increasing use of telemedicine – another product of the pandemic – will enable insurers to improve their claims process, triaging cases through the use of bots or even AI avatars selected by the customer.

Auto, home and small commercial insurance are looking to integrate technology. Auto claims will use on-scene assistance for data gathering. Some already accept images of the scene and damage provided by the customer, removing the need to send out a loss adjuster. In the case of certain car manufacturers like Tesla and other high end brands, that will include on board images and video in addition to telematic data.

For home, ‘remote assessment’ allows insurers to receive evidence of leak or flood damage and increasingly will also access data from building sensors.

Case studies

Descartes Underwriting

Parametric insurance is signed to settle claims based on data that insurers already have access to from meteorological sources, and their own internal scientific teams.

Descartes operates globally and offers data-driven parametric insurance against climate risk.

It is creating what it calls a new generation of parametric solutions: fully transparent, customised to the client’s needs and providing swift claims payment.

It is doing this by integrating new data sources, including the internet of things (IoT), satellite imagery, stationary sensors, radar and third party data. IT then applies its own proprietary algorithms to unlock risk insights.

It offers products associated with the risks from climate change – such as agriculture (drought and flood) and foresty (fires).

It also has products for risks associated with efforts to combat climate change, which includes energy – the wind not blowing – and other business interruption and supply chain disruptions.

In March this year, the government of Djibouti signed the first ever multi-year, multi-peril agreement on the African continent with the African Risk Capacity Group (ARC Group) to protect the lives and livelihoods of its most climate-vulnerable communities.

Bdeo

This insurtech has developed its ‘visual intelligence’ technology to automate underwriting and claims tasks in motor and home insurance.

Claimants can submit photographs and videos via their smartphone and AI then analyses the evidence, providing the insurer with estimates for damage, repair opportunities, costs and probability of fraud.

Fraud is assessed on the basis of whether all images were recorded at the same location for home claims. In the case of auto, the image analysis will indicate whether the vehicle shown is the one covered by the policy.

Using Bdeo has saved some insurers up to 70% in operational costs. Remote claims technology also reduces the carbon footprint by avoiding unnecessary travel.

One of Bdeo’s Spanish insurer partners – Mutua Madrileña – reduced its auto quote process from five days to six minutes.

In Latin America, Zurich MX connects policyholders with a remote adjuster allowing a remote claims evaluation to be completed within 15 minutes of the case being assigned.

Bdeo now supports around 30% of its motor claims.

Insured Nomads

This US based insurer has a global team providing cover at individual and group levels for those who are seeking travel and health cover that goes beyond the typical policy available.

Policies cover everything from travel delay, through medical up to war zone cover – even in locations like Ukraine.

Using modern tools – but retaining a human face – it delivers assistance in the customer’s own language and even covers mental health in both health and travel policies.

It uses both digital wallets and physical cards to reimburse claimants, though the digital solution is far quicker.

The cover delivers everything from a panic button and relocation and evacuation, right down to immediate access to airport lounges in the event of a flight delay.

The likely future of claims?

During the pandemic, successful insurers managed to redeploy resources to deliver ‘next generation’ claims, because they had to – their BPO providers were unavailable.

While there seems to be general consensus among the big consultancies as to how  insurers must improve their claims processes, one McKinsey report highlights five areas that insurers should focus on if they wish to achieve that next stage baby the start of the new decade.

They are: empowering the claims workforce; redefining proactivity; reimagining the insurance role; evolving the claims ecosystem; and transforming talent.

The report expects real people to remain an essential component of the claims process despite the rapid deployment of AI and ML.

Increasingly, simple claims will be handled by technology and sophisticated carriers will use advanced analytics to segment and route claims through AI algorithms to process photos and videos of damage for appraisal to deliver an initial estimate. This can then be shared with customers and repairs and even temporary accommodation may be arranged – all through an app.

It is quite possible that if the customer is satisfied with how they are treated – ie the claims journey is satisfactory – they may never speak to a loss adjuster, but instead are regularly updated through the claims process to its conclusion.

There will be some who want a more hands on role and speak to a claims handler over the phone, but this will leave humans free to deal with the complex claims.

Claims handlers will be assisted by new tools that expedite the process and reduce friction points between the customer and insurer, such as medical treatment analytics that alert an adjuster that a customer claiming workers compensation has not yet completed necessary treatments, allowing them to follow up with the claimant and notify the customer.

And where necessary, they have the benefit of being able to apply not only their expert judgement, but empathy.

A new form of productivity

The process of redefining productivity is all part of personalising the claims experience. Different customers will receive different service. Just as home customers may receive pictures and videos of a roof repair, auto customers may get texts and images showing the progress of a repair.

An automated “claim concierge” – or a bot – may help customers and claimants through the claims process to reduce the need for adjusters to interact with the customer.

While a different approach to segmentation will be required, the report considers this has a very good chance of delivering a seamless customer experience while streamlining claims operations.

The role of the insurer

Telematics, coupled with connected devices such as health trackers, sensors, mobile phones, etc, will shift the role of insurer in preventing claims.

The use of third party data such as weather forecasts will help inform insurers and customers about risks before losses occur.

Over time, AI will oversee the implementation of preventative measures. In colder climates, building sensors will alert owners of the risk of frozen pipes and warn people to turn up their heating or simply trigger smart thermostats to warm buildings up.

Hurricane shutters will be deployed automatically in susceptible areas, based on weather notifications sent by the insurer.

This extends far beyond the internet of things to the internet of people. Sensors embedded in workers’ clothing and machines will advise people to take breaks and avoid physical or mental fatigue.

Alternatively, sensors monitoring their movements will send an alert that stops a machine automatically to prevent injury if a worker steps out of a safe zone.

Shopping malls or transport hubs may instal flooring that changes colour when wet to highlight slip hazards. All these things are already possible, but if adopted at scale, they will become more economically viable.

A new ecosystem

The further adoption of sensor based technology data has many different applications in buildings, cars wearable devices and machines.

A sensor identifying a failing sump pump can search local retailers for necessary parts and book maintenance to reduce water damage.

In company car fleets, sensors collect the point of impact and speed of travel, which can be combined with other data to determine who may have been at fault.

This expanding ecosystem of claims will extend opportunities beyond improving the customer experience into adjacent businesses, offering access to new customers earlier and deepening relationships with them.

This may go beyond claims prevention through auto maintenance and repair or even assisting customers with used car purchase to help them select a well maintained vehicle.

This will unlock value and create value for insurance. But integrating all these components will be difficult and it will pitch insurers against providers of claims management systems. Whoever wins will have competitive advantage because they will control the data.

Reinvented roles for real people

There will be two different types of handler position develop during this decade. One is digitally enabled customer services, while the other is digitally enabled complex claim handling.

The latter will deal with complex and technical claims that automation simply cannot deal with, yet.

This will create new positions in claims prevention. Naturally, places for technical and specialist roles in data science, product management and IT will also be developed.

There will also be a need for claims technology products owners and digitally enabled quality assessors to ensure AI enabled tools are working properly.

This means insurers will have to broaden their technology skills as well as social and emotional ones.

The final analysis

While much remains to be done to join all the dots in insurers’ claim divisions, it is reassuring that there is plenty of evidence that technology, skills and even processes exist to enable an insurer to radically improve their claims process.

Better claims leads to better risk management and the potential to unlock new products and even markets.

No one doubts that a bad experience undermines retention and acquisition, but a seamless one is not only preferable, but should be attainable.

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