November 23, 2020

The claims journey is the ‘moment of truth’ for an insurance company – it helps ascertain if customer expectations have been met or not. While the fundamentals of claims processing have not changed, the practical application sure has. Tech-driven claims processing and the emergence of insurtech ecosystems, concierge service providers, and so on, has enabled insurers to improve customer experience, drive faster settlements, and considerably cut loss adjustment expenses.

Thanks to artificial intelligence (AI) and the internet of things (IoT), digital interactions with customers happen even before the occurrence of a claim. Therefore, many insurers are moving toward continuous (risk) monitoring to avoid losses and mitigate risks. This can be done using telematics, smart home utilities, wearables, and with the help of third-party intelligence partners who provide data pertaining to real-time weather, traffic updates and hazard alerts, medical advisory, and so on.

Over the past few months, the COVID-19 pandemic has wreaked havoc across the globe, disrupting livelihoods and businesses alike. Several scenarios have unfolded for the insurance industry in the wake of this crisis. Typical cases include, a rise in call volumes, unexpected spike in travel insurance, mounting precautionary testing and medical bills in health insurance, as well as a rise in premature death claims as part of life insurance. One can also observe a reduction in the number of claims in personal auto insurance due to remote working enablement, closure of many small businesses due to social distancing norms, increase in business interruption claims, and erratic or improper home repair or maintenance under property insurance.

Going ‘Touchless’ for a Better Claims Experience

Recognizing that speed is of the essence when it comes to claims processing, insurers are adopting digital technology solutions such as mobile FNOL apps, apps to capture photos and videos of damage, and so on, by leveraging AI and IoT. These efforts are paving the way for touchless and automated claims processing which has become even more pressing a need in the ongoing pandemic situation. Touchless claims processing, remote investigation and virtual adjudication of claims, and straight-through processing are on insurers’ radar now. Almost 60% to 90% of claims in personal lines and small-business insurance can be automated, enabling carriers to achieve straight-through and seamless claims processing, thereby reducing the claim settlement time from days to a matter of hours...or even minutes!

In P&C insurance, claims that are categorized as high frequency but low value can be automated and led to closure rather swiftly. Device or web-based notifications of claims along with IoT sensors and imaging solutions like drones can quickly enable the first notice of loss (FNOL). Thereafter, claims triaging and emergency or repair services can be triggered automatically. Advanced AI algorithms can check for fraud and handling of initial claims routing. Online video streaming support for inspection (damages, wear, tear status, and so on) can help understand and quantify the loss, and arrive at claims estimation quickly. AI based computer vision tools available today can validate the authenticity of such videos. Virtual AI adjusters and assistants can handle interactions and proactively update the status of the claims, as well as coordinate with other ecosystem players such as auto or home repair services, medical services, funeral services, and concierge service providers – this helps limit customer intervention only where absolutely needed. Analytics and data-driven insights aid the decisions around complex, unusual and contested claims.

In life insurance, claims adjudication requires policy information alongside information pertaining to the incident that comes in handy to decide the next course of action. Here too, automating the workflow and using case management and decision support engines can shorten the claim processing time and make life a lot easy for the beneficiary.

While touchless claims processing holds a lot of promise for the insurance industry, we must be cognizant of one major pitfall – fraud. With cybercrime at an all-time high, it is quite possible for fraudsters to manipulate claims and have insurers pay through the nose. According to Shift technology “Suspicious claims have increased as much as three times from what was reported before claims automation was deployed”. Limiting the number of claims that go through STP for an insured and reviewing automation rules periodically can ensure error-free claims processing.

A Futuristic View of the Claims Journey

The key tenets of the claims transformation and modernization programs that insurers must embark on are automation in processing, reduced and streamlined workflows, and AI-powered decisioning engines.

Claims processing in 2030 could be envisioned to include the following;

  • AI and IoT powered, proactive monitoring services to reduce claims frequency and severity
  • Better data or information capture mechanism at all stages of claims especially the FNOL, so that the subsequent steps are better informed and can proceed seamlessly
  • Reskilling the workforce with advanced technologies and deploying AI-powered decisioning engines to improve the productivity and error-free processing
  • Tech-enabled proactive communication strategy to ensure minimal customer interventions
  • Ecosystem play to delivery holistic services to customers (for instance, faster repair or replacement or benefit settlement) and reduce the customer’s claim lifecycle
  • Robust operating models to ensure quick adaptability to variations in the type, frequency, and severity of claims arising out of economic downtrends, social-political scenarios, and regulatory changes   

The aforementioned interventions will definitely help reduce claim volumes and adjustment expenses. While unexpected or newer types of claims may come to fore due to developments in adjacent industries (for instance, autonomous cars, connected houses, private passenger space trips and so on), and external factors (such as pandemics, re-imagined operations of small and medium businesses, and so on), insurance firms will be able to adapt to the changes faster if the core of their operating model – claims processing – becomes truly digital. Not only will this improve business resilience, but also enhance personnel productivity and customer experience.

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Gayathri Devi is a business consultant with the Insurance industry advisory group of TCS’ Banking, Financial Services, and Insurance (BFSI) business unit. With over 13 years of experience in the property and casualty insurance domain, she has worked with TCS’ insurance clients the world over. Gayathri has led business analysis of several key engagements across the insurance value chain and has developed innovative auto insurance solutions such as connected auto platform, telematics-based underwriting, and so on. Gayathri has a Bachelor's degree in Information Technology from Avinashilingam University, Tamil Nadu, India, and a Master’s degree in Business Administration (Finance and Systems) from the PSG Institute of Management, Tamil Nadu, India.