A transformational shift in the insurance claims experience was inevitable. For a long time, insurers regarded claims as a necessity, but not as an avenue that could generate loyal, satisfied clients or provide valuable insights to profitability management. As a result, claims management often comes with many manual steps, little automation, and little emphasis on customer interface efficiency. This is in stark contrast with other parts of the insurance value chain (especially early stages like sales) which have already benefited from digital transformation.
But the COVID-19 pandemic is rapidly changing the status quo: Accelerating developments across the entire claims lifecycle, including how claims are being submitted, processed, and reimbursed.
New strategic imperatives
There are five prominent imperatives emerging in the GCC insurance claims landscape; catalysed by the pandemic and the current economic climate to varying degrees.
1. Digitally-enabled omnichannel claims experience
The remote general business setup induced by the pandemic has resulted in an outburst of demand for digital interactions. This also applies to the full insurance customer experience and especially to claims submissions, where policyholders have developed a clear preference for submitting claims digitally. A connected omnichannel experience has, therefore, become increasingly critical for insurers in the region.
While the demand for digital avenues goes up, human interaction remains important (most customers still prefer to fix issues with financial services institutions by using a call centre). The key is to offer a connected combination of traditional channels (e.g. call centres) and digital avenues (e.g. chatbots and video submissions).
Despite this strong demand, insurers in the region have a lot of catching up to do. For example, in KSA, only half of the carriers have their own mobile application - smaller players have a lot of ground to cover if they want to remain competitive.
2. Increase differentiation in customer claims experience
In the past, insurance competition in the region focused primarily on pricing. The sudden rise of aggregators (now commanding a fifth of the motor market in KSA only two years after inception) is evidence of the importance of price-driven competition. For insurers, it is paramount to shift the competition to a broad service focus on the consumer experience; innovation in the claims experience will be a critical element of this.
A good example for powerful service differentiation is in the area of third-party liability (TPL) claims (especially in motor insurance). We observe a strong push away from cash settlement of claims towards settlement of TPL claims through providing direct repair services or asset replacement. While there may still be regulatory obstacles to overcome, insurers are embracing the comprehensive benefits that may result from more differentiated claims service propositions – ranging from better customer experience (and associated improved retention or acquisition of clients) to improved overall claims costs.
Larger insurers, in particular, should be able to benefit from investing into a more service-oriented claims experience for customers since they have the scale required to create strategic partnerships, e.g. with repair shops.
3. Assess claims remotely
The assessment of claims is also shifting online in the post-pandemic world, as carriers embrace the need for remote data collection. Some insurance carriers have rapidly adapted operations to embrace this, e.g. setting up processes for online inspections.
Recent examples include video calls to assess workers compensation claims, app-based location sharing and photo submissions for motor claims, and even deployment of drone fleets to assess and review damage for large property and casualty claims. As futuristic as such innovative tools sound, they have already made it into the mainstream claims management processes with many insurers around the world.
4. Automate claims decision making
Apart from remote collections of claims information, insurance carriers are increasingly harnessing the power of data to automate claims decision making itself. Two themes are emerging:
• Increasing straight through claims processing:
Carriers are increasingly automating the claims assessment process, leveraging the latest data intelligence capabilities. An example of this is AI tools which can assess the extent of damage in a motor accident based on pictures submitted by the claimant. Some carriers have been able to settle up to two-thirds of claims submitted automatically, freeing up critical staff capacity to tackle more complex cases that require human intervention.
• Predictive first notice of loss (FNOL):
The intelligent combination of data sources (data that the carriers hold and integrations with third-party data providers) allows insurers to accurately predict the occurrence of loss events. In motor insurance, for example, insurers can combine third-party data on weather events (e.g. sandstorm) with geospatial data and driving behavior to predict the likelihood of a claims event (where customers have given access). As a result, insurers can be prepared for incoming claims submissions and – through a broader set of data – decide on claims more accurately.
For some risk types, Oliver Wyman observes an evolution from predictive FNOL to no FNOL, a setup where carriers themselves identify and calculate payout for a risk event even before the policyholder submits a claim. One example of this is in travel insurance, where some carriers will have the claim amount processed for flight delays instantaneously, with money in the bank soon after the policyholder reaches their destination.
5. Turbo-charge fraud prevention
Fraud rates remain considerably higher in the Middle East compared to many other parts of the world, especially in mandatory motor and health lines. For example, in KSA approximately a fifth of all motor claims are estimated to be fraudulent (up to 10 times higher than rates observed in other G20 economies). The pandemic poses a risk of further exacerbating fraud, stemming from its economic impact (e.g. increased risk of policyholders trying to ‘reclaim’ insurance premiums from manipulated claims submissions or consciously brought-about events).
The need for sophisticated risk capabilities has never been higher: Both for initial risk scoring (to release low risk claims to cash strapped policyholders) and for triaging claims assessment. To build risk engines capable of delivering such fraud prevention capabilities, cross-industry data sharing is an important prerequisite.
In KSA, initiatives such as NAJM in motor and NPHIES in health are geared towards connecting all stakeholders and allowing sector-wide data sharing, a first and critical step in transforming the claims landscape.
What is next?
While several regional players are investing heavily in digital transformation, most market participants, especially smaller players, have a lot of catching up to do. We expect industry consolidation to pick up, driven by the size of infrastructure investments required.
For insurers willing to pick up the challenge, there are three key guiding principles:
• Relentlessly focus on claims innovation:
Claims experience is arguably the single most important differentiating factor for insurers. Policyholders’ expectations are high and growing, given their positive experiences from other sectors; regulators are recently observing an increase in complaints, mostly grievances over delays in compensation or cumbersome claims procedures. It is therefore critical that the operating models of insurers are geared towards providing a best in class claims experience.
• Engage in strategic partnerships to help deliver:
Transforming the claims experience sets an ambitious agenda. Insurers do not have to embark on this ambitious offering alone. It is critical to find the right set of strategic partners at the outset, be it for data provisioning and processing, for providing future-proof technology infrastructure or for exclusive services.
• Hire new talent:
The insurer workforce of the future will require a new set of skills. Retraining existing employees alone will not be sufficient to bridge the gap to what a digitally-enabled claims infrastructure will require. Insurers will need to compete with other sectors (especially technology) for suitable talent – and provide them with a fulfilling job environment.