The changing landscape of COVID-19 & claims

New data from Ernst & Young highlights six risks and opportunities that insurers face in the wake of the coronavirus.

The onset of COVID-19 expedited many changes in how claims are handled. Collectively, these six factors represent huge financial states for insurers. (Photo: Jozefmimic/Stock.adobe.com)

When the COVID-19 pandemic struck, most claims operations succeeded in quickly transitioning their people to remote working and maintaining operational resilience. Looking ahead, however, the priorities are shifting to managing costs and improving quality. Even as claims leaders continue to manage widespread virtual work risks, the pressure to deliver is intensifying.

In the immediate aftermath of the crisis, Ernst & Young LLP’s insurance team conducted 10 interactive online workshops with more than 100 senior claims executives to help them:

From our analysis of the session inputs, we identified the six most meaningful risks and opportunities for claims operations.

  1. Managing employee retention and performance in a remote working environment

Remote work is here to stay, which presents a new set of risks from increased cybersecurity threats to organizational and cultural concerns. Claims leaders understand the importance of talent for future success. A full 60% of participants have already turned their attention to the hiring and training processes. A slightly larger percentage view effective strategies to attract and retain employees as an immediate-term focus.

Employee retention is key to prevent competitive “poaching” of top employees. Remote working may cause some workers to feel less appreciated and less connected to coworkers, which may lead them to explore other opportunities. This threat is particularly high given that employees can now work remotely for any company regardless of geographic location.

Managing remote employees’ efficiency, productivity and engagement will become the priority according to 80% of workshop participants, while 75% pointed to employee morale as a critical risk. Insurers that can promote mental health and prevent burnout are more likely to keep their best people.

  1. The acceleration of digital capabilities

Before the crisis, many insurers were expanding their use of straight-through processing. They were also using automation (e.g., for first notification of loss communications) and artificial intelligence (to flag anomalous and potentially fraudulent claims). The COVID-19 crisis will only accelerate these trends, which means more risks for insurers to manage. Among those are implementation risks for e-signature and e-payment applications, process automation risks and the limited opportunities for testing before deployment.

On the human front, maximizing the return on digital investments requires managing engagement of workers and vendors, who may fear automation will eliminate their roles — a concern cited by nearly 90% of participants as a priority concern now. As claims operations become more digital, insurers will need both the correct technology and people with the right skills and mindset to leverage technology and data to deliver higher-quality customer and claims outcomes.

  1. Monitoring and maintaining quality through increased volumes and remote working

COVID-19 has put insurers in the spotlight relative to the industry’s social purpose of providing protections to people, businesses and communities. Thus, maintaining claims quality and accuracy is critical now. The first step has been validating that the capacity is in place to manage and resolve catastrophic claims, which are expected to rise. Because the COVID-19 pandemic is preventing field inspection and adjustment, insurers must develop more virtual capabilities. That means deploying new technology and training for new skills. Quality must be the goal for all claims, but especially for virtually adjusted claims, particularly considering the financial stakes and likelihood of spikes in claims volumes.

Looking ahead a few months, assessing the quality of repair shops for automotive claims will be a priority, according to 83% of participants. That’s true because of the prospect of prolonged durations due to parts availability (because of potential supply chain disruptions) and reductions in salvage values.

  1. Effectively and proactively managing vendor performance and risk   

Managing vendors is another concern. Data security was cited as a near-term concern by nearly 90% of participants. Three out of four are focused on selecting vendors for collaborations on emerging digital capabilities.

Looking ahead a few months, the top concerns are data quality improvements on vendor populations (cited by 75% of participants) and the ability to locate parts and complete repairs efficiently (60%). Claims leaders are also monitoring the resilience of key suppliers, including independent appraisers and adjusters.

  1. Preparing for legal, regulatory and legislative action 

Insurers expect intense regulatory scrutiny and myriad legal challenges relative to COVID-19 claims. Trials in the court of public opinion are also likely. Regarding near-term focus, 83% of participants cited managing disputed claims.

Most workshop participants viewed new avenues of liability, new legislation focused on the industry, and the potential increase in lawsuit volumes as significant concerns. Many insurers are actively planning and preparing for litigation. Proactive adherence to evolving legislation and consistency in response to shifting regulations will be critical for navigating the uncertainty.

  1. Rapid upskilling and reallocation of resources

Workshop participants recognize the need to recalibrate their resources in response to shifting volumes; nearly 90% of participants cited scaling virtual capabilities to recalibrate resources (e.g., from auto to property) as a near-term priority. More than 60% are focusing on managing excess capacity in the coming months if claims volumes and frequencies remain depressed in some lines of business.

This will be easier said than done. Before they can reallocate staff effectively, insurers will need to upskill and cross-train workers — a daunting challenge in a remote working environment. Coaching, mentoring and traditional training programs must also be modified for digital channels.

Taking the right actions today to improve performance tomorrow

Individually, these six areas represent a framework for action in both the near- and long-term. Collectively, they represent huge financial stakes for insurers. Firms that form the right response strategies and action plans will be able to protect their margins and manage their costs more effectively. Those that delay action or lose focus on these factors may risk lower customer satisfaction, operational disruption and financial leakage at a time of extreme economic uncertainty.

Charlie Mihaliak (charlie.mihaliak@ey.com) is a principal in EY’s insurance consulting practice where he assists clients with planning and executing transformational change programs.  Jim Kremer (Jim.Kremer@ey.com) is a managing director within EY’s insurance and actuarial consulting services and co-leads EY’s claims transformation offering. Anthony Tempesta (Anthony.Tempesta@ey.com) is a principal in the financial services and business transformation practice, specifically aligned to insurance and working across both P&C and life carriers. Reprinted with permission from EY.

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