Taking a digital approach to claims processing

Insurance companies across industries are experiencing overwhelming shifts in their market, from disruptive innovation to changing consumer expectations. But even as leading companies explore the potential for digital technologies to streamline claims processes, some fear these advancements will depersonalize communications, negatively impacting policyholder experiences.

A recent Twitter chat with insurance executives around the InsurTech movement shows while innovations such as the use of drones to speed insurance inspections, robotics to process low-risk claims and telematics to speed first notice of loss (FNOL) capabilities have tremendous potential to improve the quality and efficiency of claims processing, there is concern that the value of innovation will be mitigated by the loss of one-to-one human interaction.

“There needs to be consideration for the need to be heard, not just processed,” one vice president of insurance products said. Others commented on the need to ensure digital innovations heighten the policyholder experience while automating claims reporting tasks. “Many are afraid that as we remove the human element, we may diminish loyalty,” a product management director shared.

Insurance innovation

When it comes to digital innovation in the insurance space, it can be difficult to separate facts from fiction and true priorities from flashy trends. Recent research points to five key considerations for making the move toward a digital approach to claims processing and payment — and ways to support a personalized experience.

1. Insurers that use digital innovation to increase brand loyalty often gain considerable ground.

A J.D. Power survey shows delivering a consistent omnichannel experience is critical to retaining current auto insurance policyholders and attracting new policyholders. Forty-five percent of auto insurance policyholders use multiple channels when purchasing their policy, including digital, according to the survey.

One survey shows insurers that increased interactions with policyholders, such as through the use of a digital platform, can gain up to a 20% increase in Net Promoter Scores over a three-year period.

“We’re entering an era of consumer-centric insurance that will likely be marked by a surge in new digital offerings and serious efforts by insurers to improve the auto insurance shopping experience,” Tom Super, director of the Property and Casualty Insurance Practice for J.D. Power, said in a release. “Auto insurers looking to differentiate and win new customers are making big bets with digital — such as in personalization — that meet customers’ growing expectations for improved interactions.”

A study of 33,000 insurance policyholders by Accenture points to four strategies for using automation and digital communication to drive loyalty:

• Automate routine transactions and emphasize personalization and high-touch service.
• Communicate your commitment to data security and protecting policyholders’ interests to build trust.
• Explore “pure” online and digital distribution options to attract “nomads,” insurance policyholders who value digital innovation and want new ways of accessing services and advice.
• Incorporate computer-generated chat functions as a complement to — not a replacement of — one-to-one customer service.

2. Low barriers to market entry demand that insurers enhance their digital capabilities.

Insurers that cling to traditional ways of interacting with consumers risk becoming obsolete in the face of changing market dynamics, according to an EY whitepaper.

Insurers can make numerous gains by applying new technologies to claims processing as well as underwriting, according to EY research. For example, replacing manual claims and underwriting tasks with digital innovations could improve efficiency by up to 40%. Digitalization of the underwriting application process also ensures the process is completed in as close to real time as possible — and this increases the prospects of a customer purchasing a policy from 70% to 90%.

One innovation currently being explored by leaders in this space: the use of drones for claims adjustment and processing. It’s an idea that shows promise for:

• Information gathering for underwriting and risk-based customer acquisitions
• Remote claims assessment
• Calculating premiums for homeowners’ insurance
• Site inspections for commercial insurance

Insurance companies would still need to invest in human talent to review drone footage, one Twitter chat user pointed out, but the time savings could speed claims and underwriting processes, reducing costs while improving satisfaction.

3. Digital innovation better positions insurers to meet emerging consumer expectations.

These expectations include the ability to personalize insurance solutions and to increase efficiency around claims processing, claims payment and other transactions, according to a PwC report.

One prime area for digital innovation: incorporating new technologies for insurance selection, claims processing and payment, according to the report.

Consider that auto accidents typically result in payments to multiple parties: doctors, hospitals, body shops, towing companies and policyholders. Virtual payment solutions can help reduce the cost of processing claims payments and increase efficiency. They can also be used to ensure payees are paid according to their preferences — from checks to automated clearinghouse payments to virtual card payments.

With virtual payment solutions, claims payments are received quickly — typically, eight to 10 days sooner than check payments. Virtual payment solutions also help protect your company from the risk of payment fraud. Seventy-four percent of U.S. organizations were the target of check fraud last year, according to a recent survey of finance and treasury professionals. By moving away from paper-based payment to a digital solution, insurance companies can avoid financial exposure and reduce payment risk.

4. Artificial intelligence (AI) is showing strong potential to reshape processes for insurance claims, distribution, underwriting and pricing.

A McKinsey report shows tools such as computer vision and natural-language processing can:

• Create a personal risk profile for policyholders by analyzing their public online photo galleries, such as their Facebook or Instagram feeds.
• Act on customer service requests without the use of human intervention.
• Use emotional intelligence capabilities to sense when a customer is unhappy and immediately connect the policyholder to a human agent.

The impact for insurers is significant: AI has the potential to eliminate fraudulent claims, which cost the industry $40 billion per year, according to the FBI. Common causes of fraudulent claims include embezzlement of insurance premiums, workers’ compensation fraud and disaster fraud schemes. Meanwhile, 74% of consumers say they would be open to computer-generated insurance advice, which offers the potential for personalized service at reduced cost.

5. Telematics is gaining a strong foothold in the insurance industry, especially when it comes to auto insurance.

Globally, growth in the use of telematics in the automotive industry is expected to reach $17 billion by 2021, with some national auto insurers offering discounts to policyholders who allow digital devices to track their driving habits and demonstrate safe driving habits.

Monitoring the behavior of policyholders through telematics enables insurers to better understand their risk pool, with data that track the time of day drivers typically operate their vehicles, how well they make right and left turns, their average speed, how fast they accelerate after stopping at a red light, and more. It also encourages policyholders to change their behavior based on the driving “grades” they receive (typically, each month).

Two years ago, a Pew Research Trust study found 45% of consumers would not find the trade-off of personal driving habit data for car insurance discounts appealing. But recent trends point to a change in consumer mindset and a push toward increased adoption in 2018.

Designing a higher-tech approach

In an era of consumerism and increased competition, it’s critical that insurance companies consider the right approach to digital innovation — one that reduces costs, enhances consumer engagement and satisfaction, provides increased insight around the populations they cover and helps avoid financial risk.

There are four steps insurance companies can take to design a high-value approach to digital innovation, according to EY:

• Find ways to link high-quality customer experiences to both processes and enabling technologies.
• Design offerings that emotionally engage customers at key points in their journey.
• Use analytics to gain key insights on your customer population and adjust your approach to digital innovation based on their needs.
• Track technology trends that affect consumer behavior — both digital and non-digital — and use these insights to continually enhance and redesign your approach.

Taking the time to separate the glitz of new innovations from technologies that best match your company’s needs in the areas of claims processing and more — now and in the future — will best position your company for success in a digital environment.

Jeffery W. Brown (jbrown@vpayusa.com) is president of VPay, a turnkey claim payments platform focused on the property and casualty, workers’ compensation, healthcare and warranty industries. He regularly works with legislators and regulators around the country on data and security issues and emerging payment technology applicable to the insurance industry.