The insurance-claims journey—from prevention, to loss notification, to assessment, to handling and settlement—has historically been opaque and confusing to customers. They have paid in advance for an abstract product, a policy to defend against risk, and at the “moment of truth” when they want to recoup a loss, they are faced with a complex, cumbersome, often very time consuming and iterative process.
From the insurer’s perspective, claims management is often seen as a cost center only, as claims expenses and indemnity spend are a major factor for the overall financial success of the company as a whole. In the European insurance markets, for example, the annualized growth of total benefits-and-claims spend is more than 4 percent, translating to more than €350 billion per year, a number that is sure to rise.
What will the future of insurance claims look like?
Insurers are aware they have to change their claims management, as customer expectations have changed in the digital age. They want to be served 24/7, they want to decide when to talk to humans and when to go virtual, they want a simple, transparent (ideally real-time) process that allows them to collect what they feel they are owed. On top of customer expectations, Insurtechs—and even established non-insurance players—are building digital ecosystems to solve customer hassles along the claims journey. Rather than getting pulled into a price war in a stagnant market that has little growth opportunities, insurers know they need to provide a more customer-centric service, which will help them gain and retain customers.
While premium increases will cover the growing claims spend, that only solves half the problem. The higher the premiums, the higher are customer expectations for outstanding service at the “moment of truth.” With digitization, however, insurers can reduce loss-adjustment expenses by more than 20 percent, and improve customer satisfaction by up to 30 percent. The question is how.
Rather than just throwing technology at the problem in a piecemeal fashion, insurers need to take a step back and re-imagine the customer journey. How do customers want to experience a claims process? And how does the insurer’s value proposition map to those expectations? Do insurers want to increase cost effectiveness, settle claims fast, or provide the smoothest, simplest, and most customer-centric process? Or all of the above?
Various technologies and digitization levers can align the insurer’s value proposition with the customer expectations. Sensors at home, in the car, and on the body can provide data feeds to enable the insurer to provide additional services—such as sending a plumber to fix a leak before serious water damage occurs. Photo apps, drones, or AI technologies can speed up claims assessment. Integrated rule-based triaging, natural-language-based document screening, or using virtual assistants and bots can simplify claims settlement. Integrating partners via platforms into a digital ecosystem will allow for faster, more convenient claims handling and possibly even self-service settlement. Analytics from data collected through the entire claims process will improve post-claims file reviews. All of these examples ultimately result into an improved customer experience, and significant lower claims handling and indemnity costs, as the example below show.
DIGITAL-INSURANCE CASE STUDIES
International insurers are realizing significant results from digitization across the claims value-chain. A large North America insurer, for example, implemented a range of digital levers, the most prominent being a photo-based claims app that can inspect damage to more than 70 percent of cars. The app also allows body-shop repairers to video-chat with claims adjusters for quick assessments. Overall, the insurer improved its net promoter score by 1.6 points and has improved its loss ratio by 0.5 percent.
An Italian insurer introduced an app-based platform that guides customers through the entire claims-management process, with immediate support from the service provider as needed. After two years on the market, more than 100,000 new customers are using the app and satisfaction scores are high.
Another large global insurer, which has earned the highest net promoter score for a fifth consecutive year, uses drones to investigate and assess damages. This has cut underlying claims-assessment costs in half. Along the claims journey, the client can switch from virtual assistants to real agents, but the insurer found that roughly 70 percent of the clients do not need or want human interaction. A virtual agent partakes in more than 1 million conversations with more than 500,000 members a month. More than 2.2M policy holders have subscribed to multi-factor authentication—using face, fingerprint or voice for identification to decrease fraud for policy holders.
Digitizing claims management should be a top priority of insurance executives. It will improve the efficiency and effectiveness of claims management and increase customer-satisfaction scores by creating a better experience at the “moment of truth,” when emotions run high. As a positive side effect, employee and partner satisfaction scores will improve as well.
The key driver is switching the insurer’s focus from cost containment to facilitating a transparent and simplified, consumer-centric claims process—transitioning from providing an actuarial product to providing an interactive, customer-centric service at each point of the journey.