By Paurush Singh

As they inspect homes ravaged by storm waters or step away from cars wrecked in accidents, most people’s thinking quickly turns to insurance. So it is no surprise that the actions of their insurer in the hours and days after these life-altering events can have a profound impact on a claimant’s attitude. Will the insurer create a satisfied customer who will be loyal for life or a disgruntled customer who will tell anyone who will listen about the horrors of their experience?

In general insurance, claims can be a defining moment in the lifetime value of the customer. It will likely be the only time a customer has a human interaction with their insurer.

If the first claim goes through smoothly, the insurer need not worry about customer loyalty, but if anything goes wrong, they have immediate and permanent attrition. Unfortunately the industry’s track record is patchy – according to an industry report, a significant number of customers are dissatisfied with claims handling and 83 per cent of the dissatisfied clients plan to switch their provider.[1]

The pandemic led to a considerable increase in the cost of claims, especially in health, and now we are seeing a rise in claims because of extreme weather in Australia, the United States and now the United Kingdom. Insurers have extra opportunity – and incentive – to create a quality user experience.

Insurers and customers share a common ideal experience

From the customer’s perspective, the desired experience has at least these elements:

1. instant (or fastest) claim settlements – “I have expenses that need payment now”
2. minimal iterations and queries from the insurer – “Just ask me once”
3. self-serve mode or assisted mode over a preferred channel – “Let me decide how to interact with you at my preferred time”
4. maximum amount on claim expense – “I have been paying you premiums for this moment”

From the insurer’s perspective, the desired experience is the same. This includes the last point, because most insurers are reasonable when it comes to the amount settled and do not want to unnecessarily reduce the payout of a genuine case.

But insurers often struggle to correctly investigate and adjudicate the claims because of inefficiencies in their operating model, especially around legacy technology and employee skillsets.

In general insurance, most of the disruption has taken place in the motor segment, where claims below a certain complexity and value are automated. As use of automation spreads, we can expect to see similar innovation soon in areas such as fire, marine, health and professional indemnity.

To benefit from this disruption, insurers will need to take an incremental approach.

Start by fixing the first notice of loss (FNOL) touchpoint for customers. This is the opportunity to get all information required, so it ought to be exhaustive and pertinent, and avoid asking for information you already have, such as policy number or sum assured. The machine learning algorithm can then convert the raw data into insights, with a decision on the settled amount or rejection to be reviewed by the claim manager. The claim manager can then further investigate or seek clarification in case of a complex claim or even just override the machine learning decision with their own.

A four-step approach can transform the handling of claims

Insurers can adopt the following approach to transform their handling of claims.

1. Upgrade ways of working. Have one view of the customer and provide that view early in the journey to everyone in the claims team. This means removing silos, collaborating, and including the experts up front. By design, the claims process is sequential and depends on the previous step. Machines can do basic data collection and assimilation, but it is important to triage the complex cases and get experts involved early. Squads comprising handlers, adjusters, managers, and legal and medical experts should be notified of the claim details instantly. A quick opinion from experts can save many iterations with customers by helping officers ask and provide the right information, reducing non-value add work and having much better visibility on the claims outflow and time for settlements.

2. Build new capabilities. Going forward, most claims will be handled by machines. The role of humans will be to guide, answer and empathise with the claimant. Humans will also have the role of analysing the decisions of machines to include the right data points (internal and external) and further improve algorithms. Insurers will need to upskill the workforce to focus on analytics as an enabler for decision-making on critical touchpoints. This will help in providing accurate feedback to underwriters on product pricing and features. Insurers will need to embed data scientists, data analysts and designers into existing teams to help them improve the decision-making of algorithms and provide real-time contextual experiences to customers and employees.

3. Develop a partnership ecosystem. Insurers will increasingly adopt microservice-based architecture that will enable them to pick and choose insurtechs and third-party vendors (such as lawyers and repair shops) to enhance capabilities and differentiate their propositions. For example, an insurer struggling to enable a workflow because of disintegrated IT architecture could experiment with an insurtech that provides those services in a pay-per-use mode instead of building the system in-house or buying the software upfront. This is like renting a car from Avis, driving it, and then deciding whether to purchase it yourself, try another car or keep renting the same car from Avis.

4. Proactively avoid claims. Avoiding claims may not intuitively excite insurers as the benefits may not be tangible, but they are nevertheless significant in the long term so require investment today. When extreme weather is expected, motor insurers and home insurers can use telematics, GPS and weather forecasts to warn customers. However, even in the case of professional indemnity insurance, it is possible to monitor vital parameters such as a professional’s stress or body exhaustion and alert them as soon as the limits are breached.

Claims need to be on the digital transformation agenda

The claims function will have a profound effect on profitability and revenue, through renewals. Insurers need to put their claims process high on the digital transformation agenda.

As more customers lodge claims with their insurer, the gulf between those who invest in the claims process and those who do not will become ever larger.

Get in touch to discuss how we can support you to transform your business processes.

Connect with Paurush Singh on LinkedIn.

Published on 16 September 2022.

[1] Accenture, Satisfaction with Insurance Claims Settlements not Enough to Keep Customers Loyal, According to Accenture’s Global Insurance Customer Survey, 2014