Claims in 2030: How digital can help insurers rethink their role

Imagine it’s the year 2030. A family is away from their home during the winter season when they receive an alert from their insurance carrier that the temperature in their area will dip low enough for pipes to freeze. The traveling family doesn’t need to worry. When the chill sets in later that week, the drop in indoor temperature triggers a smart thermostat to turn up the heat and shut off the water, which prevents the pipes from freezing and bursting.

The insurance carrier has access to the automated activities and sends the homeowners notifications via text message, assuring them that the necessary precautions are in place. When the family returns home, they rate the overall experience and communication from their carrier — data that goes directly to their insurer to help to improve customer experience and product development.

To thwart any future issues, the insurance carrier has also set up alerts for the homeowners to have their pipes inspected as they age and monitors activity from the water sensors installed throughout the home, helping detect issues before costly leaks occur.

This scenario, in which the insurer plays a preventative role, is hardly far-fetched. Automation, artificial intelligence (AI), the Internet of Things (IoT) and advanced analytics are changing the ways insurers serve customers and create value, from optimizing claims handling to helping prevent the claim in the first place.

Embracing change — particularly the evolving role of the insurer and customer expectations — will be the first step in succeeding in the claims journey of the future, particularly as new InsurTechs enter the market and entice customers. The key for traditional carriers will be identifying and prioritizing major areas of opportunity, including a shift to claims prevention, creating a better customer experience through a digitally-enabled human touch, and optimizing claims management.

Claims prevention

In the pipes example, the insurer is involved in preventing damage, rather than simply reacting to it. IoT, AI, third-party data and smart infrastructure are opening new pathways in accident prevention across insurers’ lines of business — which represents an opportunity for insurers to get involved and create value with prevention strategies and technologies rather than processing and paying out claims. With the vast amount of historical claims data at their fingertips, insurers are uniquely positioned to provide guidance on accident prevention and elevate the conversation.

Carriers that build service models focused on claims prevention fundamentally alter their relationships with customers, becoming trusted partners in keeping them and their property safe — rather than only surfacing in a time of need or distress.

Developing prevention solutions will be only one part of the process. These service models will require devices connected across the IoT, AI that can process the data from those devices quickly enough to make an impact, and automation to create ongoing, proactive communication channels with customers and other prevention partners in the ecosystem.

Blending AI and the human touch for a better customer experience

When it comes to insurance, claims and customer preferences vary in complexity. For example, routine claims and simple customer interactions with predictable characteristics and patterns are typically low-touch and well-suited for digital resolution or handling by a “cognitive agent.” More complex claims or communications between the carrier and customer require humans to navigate complications, add an additional layer of empathy, or provide more explanation and detail.

Carriers that identify when and how to use AI will be able to allocate resources more effectively, so activities that require a human touch get the proper amount of attention and care while the ones that can be handled through automated digital processes can free up resources and provide an efficient customer experience.

As carriers shift to this blended approach, they will also have to navigate the customer relationship and overall experience, using their own data as a guide. The most progressive carriers can use advanced analytics at the very beginning of a preventative trigger or claim to identify the level of complexity or assess customer profiles to anticipate preferences. From there, the issue or claim can be segmented and routed to the appropriate handler and resolution channel.

Even when a claim is directed to an agent, analytics can help that agent more quickly process various data inputs and make better-informed decisions throughout the claims-handling process. For example, in cases of extreme weather, even the best preventative measures may not be enough to deter impact or damage. Insurers can use analytics to quickly assess the extent of the issue and provide a readout to an agent who then communicates with the customer, describes the process, and explains next steps — deepening their customer relationship, building loyalty and creating a positive experience in a stressful situation for the customer.

Ultimately, the reward is a better, more personalized experience for the customer. From the ways preventative activities and communication are managed all the way to actual claims processing when necessary, AI can aid insurers in strengthening the entire customer journey.

Ecosystem claims management

Claims prevention and management of the future will involve various data inputs, from sensors embedded by manufacturers, mobile phone activities, third-party infrastructure, and beyond, as well as building networks of repair shops, contractors, security companies, emergency support, and other players. This broad ecosystem will support carriers as they rethink their role and create new sources of value.

The key for forward-thinking insurers will be determining their role in the ecosystem. To create value in claims prevention and management, insurers will need to be key players and influencers, and also define what they have ownership of. Various stakeholders are competing fiercely to own customer data and build customer loyalty; since carriers already have direct contact with customers, they have a strategic advantage and can build on their relationships and trust to securely source and manage customer data.

By positioning themselves as integrators or facilitators, carriers can acquire data from across the ecosystem and use it to deepen their customer insights and form partnerships and networks, such as local repair services. For example, armed with data from sensors embedded in a home, insurers can use analytics to identify patterns or triggers for risk and develop joint preventative solutions with home security services or contractors that receive an automatic alert to check or replace aging pipes, for example.

When damage or issues do occur, carriers can lean heavily on the ecosystem to provide an end-to-end solution for their customers. For example, if basement flooding occurs due to heavy rains, once the carrier receives an alert from the embedded water sensor, they can send repair and service experts from their network to the home to minimize damage — mitigating the cost of the claim, saving the customer time and stress, and quickly resolving the issue.

The benefits of the reimagined claims journey, from more satisfied customers to greater efficiency, will be substantial. The carriers that identify the opportunities to make an impact — in new prevention-focused service models, improved customer experiences, ecosystem management, and other areas — will be more likely to pull ahead in what is sure to be a race for claims in 2030.

Deniz Cultu (Deniz_Cultu@mckinsey.com) and Elixabete Larrea Tamayo (Elixabete_Larrea_Tamayo@mckinsey.com) are partners in the insurance practice at McKinsey & Company.

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