The future of digital claims

Customer-centric, seamless, and personalised: the next transformation of insurance in a world of technological innovation

Technology continues to reshape all aspects of the insurance journey, and that includes the claims process. The Internet of Things, AI, chatbots and ecosystems are increasingly reconfiguring the kind of experience customers can expect when they need to file a claim, with participants in the recent Insurance Innovators Roundtable, sponsored by Shift Technology, even anticipating a reinvention of the insurance business model to deliver value to customers in new and unexpected ways.

The session kicked off with a presentation from James Russell, Head of Claims Transformation at esure Group, who shared his insights and experience from more than 20 years in the industry. He said it was a comment from his young son that best summed up his passion for insurance.

“We help people when things go wrong,” he said. “That makes me feel proud of this industry, and now we have an opportunity to use technology to make people’s lives better.”

He pointed out that the industry carries a significant trust deficit, with many customers having the perception that insurers can’t be trusted, particularly when it comes to claims. And it saddened him that everyone got excited about AI-driven start-up Lemonade as a socially conscious insurer “at last” when actually the industry has been playing an important societal role for hundreds of years.

For incumbents, the technology that powers Lemonade provides a real opportunity to rethink their business models, deliver better CX and add real value to customers’ lives. But, said Russell, there is still a long road ahead for an industry that famously lags other sectors when it comes to customer-centric digital experiences. “Most insurers are working on digital transformation now,” he said. “It’s not just something that someone else does, it’s everywhere but we still have a long way to go.”

“Something may be a lovely idea in a hackathon in Hoxton but do not fall into the trap of build it and they will come”

James Russell, esure

He added: “Digital transformation is not about digital everything, RPA everywhere. It’s about letting customers interact with us the way they want to, when they want to. Something may be a lovely idea in a hackathon in Hoxton but do not fall into the trap of “build it and they will come” because it has to be a solution that works for them.”

“Our research identified 74 pain points in the claims journey and 44% of them were related to complexity”

James Russel, esure

He said there’s no substitute for testing prototypes with real live customers to get a feel for what is working, and what isn’t. He added that simplicity and transparency are key, with customers focused on being kept up-to-date throughout the claims process and for their claim to be settled quickly. “At esure, we did some research and identified 74 pain points in the claims journey and 44% of them were related to complexity,” he said. “There’s a lot there that the industry needs to sort out.”

Other participants agreed, with some pointing out that some of the most effective changes are around language and tone to reduce the complexity that confuses customers and contributes to distrust. “Customers want simplicity with solutions that are nice, easy and logical,” said one. “They want to know why you’re asking them questions. If you don’t have to ask a question, it’s better not to.”

Managing change

Insurance is, by nature, a prudent industry and change can be slow. Our participants said that introducing new technologies, such as RPA, automation and chatbots, can hit a wall of resistance and inertia. “We told our handlers that automation frees people up to use their expertise, spend more time talking to customers and spot when they are under-insured, creating new opportunities and making their roles more interesting,” said one speaker, “but for some that was a very scary proposition because it was asking them to work in ways they hadn’t for a long time, if ever.”

Others agreed. “Some of our long-term fraud handlers probably think that they can detect fraud better than a system. Bringing them on the journey will be a big challenge.”

Thomas Harrington, Product Marketing Director, Shift Technology, said that Covid-19 related impacts on the workforce meant that some insurers were now having to think of smarter ways to support their people. “Some of them are seeing erosions in loss ratios because their workers are not executing as well as they were at one point so they need to equip them differently in the field, especially with some of the younger and less experienced team members,” he said. This will become more of an issue as a significant proportion of the workforce “ages out”. Automation can help here by handling lower skill, low complexity tasks but it is not yet ready to provide
the expertise required for more complex roles. “I do not think highly skilled, highly experienced people are replaceable at this moment in time,” Harrington said.

“I do not think highly skilled, highly experienced people are replaceable at this moment in time”

Thomas Harrington, Shift Technology

This is changing, however. “AI is now at the next level to dive into more complex processes, to augment handlers and give them context and a better vision of what’s happening in any situation so they can push a claim forward,” said Harrington, giving an insight into the future.

Other speakers shared their experiences of introducing new technology. “We had an issue with straight-through processing, with people worried about the change and what it would mean for their jobs,” said one. “We find some areas of the business are really up for it and want to automate everything but there are others that are really stuck in their ways. You really need to get that buy-in to make it a success.”

Unintended consequences

“You need to consider the downstream impacts. You can put in self-service automation but somewhere in the business they may be taking an extra 1,000 calls a week”

Another challenge is that of unintended consequences following a digital innovation. “You need to consider the downstream impacts,” said one participant. “You can put in self-service automation but somewhere in the business they may be taking an extra 1,000 calls a week because it’s pushed something downstream.”

Others agreed. “You always get unintended consequences,” said one, commenting on a case where an automation of part of a process was undermined when manual checks continued because they were linked to employee KPIs and bonuses. “You try not to (have these unintended consequences) but it’s part of change.”

“You need the right measures to drive the right behaviours. It’s not just the technology, it’s the whole piece around it.”

Another added: “You need the right measures to drive the right behaviours,” she said. “It’s not just the technology, it’s the whole piece around it.”

Inevitably, the discussion turned to the challenge of digital transformation in the face of vastly complex and inflexible legacy systems. “We’ve got millions of legacy systems,” said one. “We have six or seven different systems just to handle one product. Our current claims system is from 2004 so it’s archaic, but we have some stuff that goes back to the mid-1980s.”

One speaker said that for some niche lines there just aren’t the economies of scale to justify the investment in straight through processing. “AI makes a lot of sense where you have a lot of volume,” he said.

Data and the Internet of Things

The potential of the IoT to reshape insurance as we know it was the subject of much discussion. Sensors that can detect leaking water pipes, for example, have the potential to dramatically cut the risk of flood damage and shift insurance from a compensation-based model to one of prevention and mitigation of risk. Yet these solutions need to be carefully thought through.

“We need education to help build understanding that claims can be more than that one-in- ten-year moment of truth.”

“There are a number of IoT connected claims prevention technologies and ideas out there but you have to look at the customer,” said one participant. “What do they understand about the product? About the data? We really need education to help build understanding in the market that claims can be more than that one in ten-year moment of truth.”

James Russell of esure said that the industry needs to put its “money where its mouth is” when it comes to using IoT data flows and data transparency. “Customers need to see some reward for letting us into their lives like this,” he said. “If they’re prepared to share this level of data and be in a significantly lower risk category, then we have to put some skin in the game and give them some reward in return.”

Our speakers could see the potential of parametric insurance, which enables the automatic filing of a claim when certain criteria are met, the most famous example being flight delays. However, customers may not always want to file a claim, even when they have a valid reason to do so, because of the potential to impact future premiums. “At the end of the day, we have to try some of this stuff and then iron out some of the wrinkles,” said James Russell of esure. “This issue can be solved by providing a simple click button that double checks if the customer wants to actually file a claim.”

Keeping humans in the loop

The rise of automation and self-service options looks set to only accelerate, yet the participants agreed it was unlikely that human beings would be eliminated from the process. “I can’t see us ever not having people involved in claims,” said one.

“A fully online insurer may seem like a good idea when the customer is comparing premiums on an aggregator site,” said one, “but will it seem like such a good idea when you’ve had a crash on the M1 and you have to download an app and type into the chatbot? When it then comes to renewal, would the customer make a different decision? Or will people continue to chase the lowest price?”

“Insurance cover has got to be more accurate… We really need to move to accurate, dynamic insurance that adapts as you live your life.”

James Russell, esure

Microinsurance is another model that may appeal, particularly to those seeking to keep a lid on insurance costs, but it too comes with limitations. “Insurance cover has got to be more accurate,” said James Russell of esure. “It’s estimated about 60 per cent of SMEs are under-insured but a lot are also over-insured because they have duplicate cover. We have to get smarter at this because customers hate it. We really need to move to accurate, dynamic insurance that adapts as you live your life.”

It was a great point, with Gareth Evans, Head of Customer Success at Shift Technology, building on this to stress that customers are seeking simplicity, ease of use and speed of settlement from their insurers. The exact combination of technologies and human beings to achieve this remains a debate that insurers will continue to have for some time as they adapt to a digital future.

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