Will insurance claims go digital in 2019?

It’s the perfect storm: radically changing customer expectations, record-setting catastrophe losses, and disruptive technologies poised to make good on promises to transform claims. The momentum has been building, with early adopters driving change. The ecosystem of capable technologies has evolved, and at the same time, customers are primed for fast and frictionless interactions.

Next year may finally be the tipping point in the insurance industry, with carriers that accelerate the adoption of digital claims technologies likely pulling ahead in the market. Those that delay may be left behind with sluggish profits and a dwindling customer base.

Insurers leading the push to AI and automated technologies

Today, artificial intelligence (AI) and automation technologies such as robotic processing automation (RPA) are the darlings of investors and businesses alike. AI investments have increased more than five-fold since 2000, according to a Stanford University study, and International Data Corporation reports a 54.2% boost in spending from 2017 to 2018. Significantly, insurers are leading the charge. According to a 2017 Global Trends study, the insurance industry invests an average of $124 million per company in AI—$54 million more than the average across all other industries.

With customer market share at stake, insurers’ commitment to automation shows no signs of abating. According to a 2018 World Insurance Report survey, 80% of insurers are investing or plan to invest in AI and RPA technologies in the next three years. The new norm is that automation and digital engagement are effectively now the price of entry to this new era of claims.

Massive data and faster processing enable transformation

Information Age reported that “the maturity of artificial intelligence is totally dependent on the explosion of both processing power and underlying data volume.” One of the most important drivers of advancing claims decision technology is the abundance of data sources being tapped, from personally identifiable information (PII), to social media posts, to geo-targeted weather reports, to license plate recognition data and more.

Bigger data enables better decision insights. Data analytics harnesses this multi-source data and delivers critical insights throughout the life of a claim, such as scoring that enables automated triage and helps direct claim investigations.

Another milestone in the faster claims future is that, in 2019, machine learning systems will have been in place long enough to evolve from simplistic to advanced analysis. As claims come in, hundreds of data points can be weighed against each other to determine if they qualify for instant settlement. And the systems are moving beyond structured data analysis, with unstructured text and digital images becoming more critical to claims automation.

According to The State of Artificial Intelligence in 2018, new graphics processing units (GPUs) have made computers fast enough to train neural networks, which will allow insurer systems to “see” property damage and determine damage amounts. This visual aspect of claims analysis is increasingly aided by another new technology coming into play: remote aerial imagery.

Applications extend across the claims spectrum  

In addition to finding claims that qualify for instant settlement, intelligent systems can deploy network link analysis to better uncover suspicious claims that may warrant investigation. While saving on fraud leakage is a welcome improvement, there are more ways that automation cuts costs.

In workers’ compensation, predictive analytic models can determine claim severity at first report of injury by comparing case details with industrywide data sets. High-severity claims can be flagged for case management and closer oversight, which can help mitigate exposure.

Simple RPA tools plugged into routine processes can save big on adjuster hours, helping insurers manage staffing expenses better. For example, automated compliance checks can determine whether a claimant is a Medicare recipient, a child support obligor, or on the OFAC watch list — and streamline those respective reporting functions.

Reshaping FNOL and loss estimates

Internet of Things (IoT) applications are also quickening the pace of claims processing: the data available from connected cars and homes as well as from mobile devices can slash loss reporting time from hours or days to mere seconds. In 2019, adoption of these technologies — which improve accuracy and completeness of claims information — is likely to increase. According to SMA research, 70% of auto insurers are projected to be using telematics by 2020.

Telematics systems can send vehicle sensor data directly to insurers immediately after an accident occurs. These systems can be synced to networks that automate coverage verification, fraud checks, claimant information and more. Armed with details including speed at impact, airbag deployment, and seat-belt use, adjusters can quickly assess events and potential liability.

Similarly, the proliferation of smart devices in homes lays the path for property claims automation. Sensors that detect incidents such as water leaks can automatically send location and affected area information to insurers to initiate a claim immediately. IoT applications hold the promise of faster-moving claims and quicker settlement checks, leaving both customers and insurers in better shape.

Aerial digital imagery captured from drone, fixed-wing and satellite sources presents a new and faster means of assessing damage — and it’s burgeoning among insurers. According to the FAA, 17% of all commercial drones are used for insurance purposes. Carriers using the technology are providing faster damage estimates following catastrophes, not waiting for adjusters to hit the ground. For example, one top 10 carrier used drones following a hailstorm in Texas and reduced the time to issue a roof repair estimate to 4.5 days.

Millennial expectations are the new norm

In 2019, millennials are projected to pass baby boomers as the largest generation in the United States, with a total of 73 million. This hyper-connected generation is accustomed to self-service, speed and convenience; they want filing a claim to be as easy as streaming a song on their smartphones. Insurers unequipped to deliver this seamless experience will likely lose ground.

But it’s not just millennials — 57% of baby boomers prefer to use smartphones to manage their insurance, according to a Deloitte report. Overall, customer experience and quicker time to settlement are becoming key differentiators in a competitive market. Easy-to-implement tools such as chatbots for customer service and collaboration apps that allow insureds to submit videos and photos of losses are transforming claims by empowering customers to become part of the process.

Looking ahead, the oldest members of Gen Z already have their driver’s licenses. When the generation that grew up with cell phones in their hands buys insurance, these claim service conveniences will be even more critical.

Insurers seek bottom-line savings after 2017 losses

Adding to the impact of new customer expectations and analytics advancements is the financial pressure of record-breaking loss events. Global catastrophe losses in 2017 reached an all-time high of $135 billion, with staggering amounts of claims resulting from wildfires on the west coast of North America and major hurricanes Harvey, Irma and Maria. Property/casualty insurance profitability declined as a result in 2017, and the industry-combined ratio was 104.0, up from 100.9 in 2016, according to AM Best. In 2018, California insurers were hit again when the state experienced the worst wildfire in its history.

These stunning losses add to the business-as-usual competitive pressures, along with new threats from disrupters like Amazon dipping a toe into insurance waters. Altogether, the result will be insurers seeking savings more urgently than ever in 2019.

Automation can save the industry billions

Manual claims processes drag on departmental efficiency and impact the bottom line more than many expect. Deloitte concluded that by implementing claims automation, the insurance industry could potentially free up between 54 million and 285 million adjuster hours annually, amounting to cost savings of $1.7 billion to $8.9 billion within five to seven years.

Beyond workforce efficiencies, advanced technologies such as AI, data analytics and digital processing can lead to a reduction in cycle times, claim leakage and fraud. For example, data analytics provides key insights at the point of claim to help adjusters catch fraud early and expedite meritorious losses. Juniper Research estimates that introducing AI into claims processes will generate cost savings of $1.2 billion over the next five years, and a Deloitte report on drones states that the technology can save the industry $7 billion a year.

On the other side of the digital divide

The insurance landscape has clearly shifted, with advanced technologies and customer expectations driving the change. Becoming a digitally driven organization is no longer an option — it’s an imperative. The array of new technologies provides many avenues for insurers to explore digital claims, and available data and new solutions on the market make it feasible to implement change.

Insurers that act aggressively to accelerate the adoption of automation technologies will be positioned to win with faster settlements, less fraud, better compliance and less strain on adjusting staff — all while realizing significant savings and increased customer satisfaction. The coming year marks the time when every carrier will need to choose a side on the digital divide.

Rich Della Rocca is president of ISO Claims Analytics, a Verisk business.