Understanding the impact of automation in claims

The primary driver of any change is effective and efficient technology. However, as most know, the insurance space is a little different than other industries. At its core, it’s transactional where it needs to be transformational. Therefore, any implementation of technology must create efficiency, effectiveness and reimagine processes.

As a result, the industry has entered a new era of claims management, sometimes referred to as Claims Management 2.0. This revolution uniquely impacts each insurance stakeholder through next-generation engagement.

Policyholder point of view

Claims automation looks a little different from the policyholder perspective. While the central focus is on information sharing, the goal remains a customer-centric service approach. Automation enables this by establishing an efficient and accurate claims process.

One key accomplishment is the capability to push data into estimating software in real time. Another benefit is easily assigning adjusters in the field based on location, capacity, skillset and licensing requirements. This is especially true when deploying adjusters to catastrophe zones. Technological advances simplify pulling resources and moving them forward to aid the policyholder in a thoughtful and timely manner.

Communication with the policyholder is also enhanced. By automating initial contacts, acknowledgment letters and scheduling, the policyholder benefits from streamlined processes. Robotic process automation (RPA), or bots, assist with more of the mundane tasks in the claims process and fill the gap between legacy systems to improve operational efficiency and the overall customer experience. Some of these functions include:

• Integrating and transferring data from one platform to another
• Reconciling and verifying claims data using multiple sources, including regulations and compliance standards
• Opening and gathering data from emails and PDF files and inputting it into the claims management system
• Analyzing images, audio and documents throughout the claims process
• Using workflow automation with set rules for fully automated processes and policyholder reminders
• Implementing smart contracts enabled by blockchain technology to instantaneously authorize payments to a financial account

Policyholders are quickly seeing that this integration of technology doesn’t discount the human element. In fact, it digitally enables the human touch or what has been termed human-in-the-loop automation. It’s about finding a balance between convenience, decision-making and sensitivity. Right-touch service can boost insurer loyalty, which is critical to retaining policyholders.

The consequences surrounding poor customer service can be vast and swift thanks to social media. The successful digitalization of policy distribution, underwriting and claims handling can help to reduce the number of policyholders looking to the competition. Insurers that offer personalized experiences and products for their customers, reportedly see an 81% increase in customer retention and an 89% increase in customer engagement. For example, usage-based insurance (UBI) products have become increasingly popular among auto policyholders.

Redesigning the claims processes involves mapping the customer journey and understanding how claims fit into the broader customer experience. Electronic claims platforms give the policyholder a greater sense of control over the process and create the opportunity for customization. They can submit claims, check policy coverage, upload documents, pay any excess due, view a settlement offer and provide details to receive payment — 24 hours a day, 7 days a week, and all without speaking to a representative. In some instances, the claims life cycle has been reduced by up to 70%, increasing overall customer satisfaction.

The prevalence of remote adjusting

For an adjuster, preservation of evidence is critical to their work. Virtual reality is making that a little easier and more robust in terms of visualization and documenting loss. Almost like a 3-D real estate tour of a home for sale, adjusters can utilize simulation technology to mock up property damage. Weather damage analytics and property-focused artificial intelligence and machine learning are also informing predictive models and adjuster assessments. In some cases, drone technology has also been used to gain additional perspectives.

However, these technologies are used in conjunction with adjusters on the ground rather than in an information vacuum because context in these situations is essential. Human judgment remains key to ensuring high-quality reporting and decision-making. Automation is also assisting adjusters with information transfer to streamline processes and procedures and detect fraud.

Carriers see cost savings

Customer needs are not the only aspect accelerating the pace of change for the insurance industry. The carrier mindset has changed, adopting a more proactive and preventative approach to risk. The standard is no longer to “detect and repair” but rather to “predict and prevent.” Researchers have projected that the insurance industry will play a pivotal role in the metaverse in terms of identifying and mitigating risk. One insurer has already developed a browser-based 3-D virtual world to mitigate the risk of non-fungible tokens (NFTs).

Automation and AI can support the entire insurance value chain. Despite legacy technology sometimes creating challenges, carriers have made substantial changes to leverage technology and update their operational models. Access to real-time workers’ compensation, general liability, property and transportation policy information is increasing company claims productivity by 35% in some instances.

From the carrier perspective, the new technology encompasses workflow automation, custom reporting and real-time analytics. Because of the diversity and volume of claims, processes and workflows involved, the carrier benefits from streamlined digitized processes that create, track and share documents while executing expeditious data exchanges.

A leading software provider finds that carriers are looking to track and adjust reserves while eliminating concerns about potential financial penalties to the company or its clients. Additionally, heightened security concerns have made built-in administrative, physical and technical cybersecurity safeguards a priority to protect data transmission security, authentication, access control, audit control, and integrity. The ability of carriers to customize alerts and emails is also in high demand.

The adoption curve among carriers is mirroring that of policyholders. The industry is more open-minded to remote work, digital processes and utilizing AI to speed up traditionally slower methods. Some individuals within the industry have speculated that generative AI like Chat GPT will influence policy underwriting, claims handling and the customer experience. Speech analytics is already improving customer satisfaction and reducing carrier costs.

While the technology infrastructure has improved, there remains substantial room for expansion. The path forward will require collaboration to push the boundaries of what is possible. The future will include integrating claims management systems and data with the cloud while leveraging these capabilities through wearable devices, telematics and sensors. Privacy and security concerns will need to be considered, especially when medical records come into play, but encryption capabilities and new technology are already being implemented. Consumers have signaled that they are agreeable to having their behavior monitored or private information shared if it means lower premiums.

Regardless of enhanced workflow, there will remain a need for a robust insurance workforce because the industry isn’t about selling widgets or commodities, but rather a service. The nature of insurance jobs may evolve to meet the challenges and opportunities presented by innovation, but the need for employees will remain substantial. After all, automation and AI are only as effective as the data on which they are built. Humans will need to continue to handle the more complex claims and provide the empathy required for a particularly tragic loss.

To remain relevant, carriers will need to wholeheartedly embrace Claims Management 2.0. The last five years have proven the industry is up to the challenge and willing to adopt new ways of thinking about the claims space. Stakeholders such as policyholders and adjusters are also seeing the benefits of innovation in the insurance industry. The immediate future will be exciting to be a part of as claims management is reimagined.

George Burgee (gburgee@johnseastern.com) is the Director of Operations – Field Adjusting & Catastrophe Services for Johns Eastern. He began his career there in 1994 and has extensive experience in handling automobile, commercial vehicle and property claims.

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