The world is going through turmoil brought on by the Coronavirus, and it has affected every industry and insurance is no exception. Currently, insurance is struggling to provide consistent and personalized offerings to set a precedent for its customers. This notwithstanding, the rise of Insuretech companies is posing a bigger challenge to established insurance companies with their implementation of digital transformation initiatives. This is compelling most companies to expedite the adoption of the digital transformation model.
Even though insurance companies have digital transformation as a priority, there are other challenges as well that are plaguing the industry. This blog takes a close look at these challenges in claims management and sheds light on technologies that have the potential to revolutionize claims outcomes. It is specially meant of stakeholders in insurance, who seek a better understanding of challenges and are keen on technologies that can help mitigate these challenges. Here it is:
High Operational Cost: Generally, it is not unusual for claims registration to be a process overflowing with paperwork, remaining data-intensive and containing repetitive tasks. This creates an inefficient mechanism where there is a considerable loss of time. To put in perspective anything that obstructs or interrupts the claims management process is viewed as an increase in the overall operational cost.
High IT Cost: Although digital transformation is a necessity, it is often obstructed by the need to replace complex legacy systems and architecture. Many times, the business still runs on outdated mainframe solutions, and putting a better system in place means disrupting the business and incurring high costs. Despite this, if an insurance company continues to operate in a “business as usual” mode it is expected to pay a heavy price for the maintenance & running of obsolete IT systems.
Inconsistent Service Delivery: This happens mainly due to the inability of the company to carry out tasks with foresight and planning. Most often, there is no system for the prioritization of the next steps in claims management. This in-turn causes substantial delays, inaccuracies, and calculations that can lead to random outcomes even in identical cases. This overall increases the unpredictability of the claims handling cost.
Increase in Fraudulent Claims: More often, the claims management system bends under the strain of opportunistic and malicious claimants. They compel insurance companies to put in place fool-proof systems that take the support of existing databases and fraud indicators further delaying the claims process.
Lack of Data-Driven Insights: This pertains to the lack of insight into the patterns emerging in the claims process, without which the decision-makers are unable to act with foresight. Besides this, maintaining large data warehouses is a costly undertaking that does not guarantee real-time data for daily decision-making. This makes financial forecasting risky and fluctuations generally threaten business sustenance.
Demanding Customer: There is increased modernization in insurance and the customer is not satisfied with anything less than the best. Trends like mobile and online claims management has streamlined the processes and, in many cases, it have become the industry norm. Going forward, customer retention will not only be governed by policy pricing and quality but also by the cutting-edge claims management process put forth by the company.
Having spoken at length about the challenges in the claims management process, let’s turn to technologies that have the potential to revolutionize the process by mainly improving operational inefficiencies and reduction in costs. Here they are:
Intelligent Process Automation (IPA): Insurance companies can utilize IPA for automating their repetitive and frequent tasks such as the assignment of claim adjusters by detecting their availability. It can even showcase parameters such as existing workload and location data. Moreover, IPA can be instrumental for the processing of bulk claim payment that calls for speed and efficiency and helps insurers to clear large backlogs of claims data.
Machine Learning: Insurance companies are improving both the claims registration process and the claims settlement process by the automation of the entire claims process. Machine learning with predictive models is allowing insurers to better understand claims costs thereby saving millions of dollars. This is being done through better case management, faster settlement, pro-active management, and targeted investigations. Also, ML is allowing insurance companies to estimate claims reserves correctly, enabling them to make the right decisions with confidence.
Data Analytics: The abundance of data sourced from the Internet of things (IoT), mobile applications, wearables, social media channels, and other connected devices. These are allowing predictive modelling to improve every aspect of the insurance business including claim settlements, claims assessments, premium calculations, and risk assessments.
Wearables & Connected Devices: More insurance companies are utilizing data from wearables and connected devices to analyze real-time movement, physical activity, and monitor health profiles. These are helping insurers to uncover new insights on the mortality of individuals to make tailor-made insurance premiums, completely dependent on the risk and behaviour of each individual. This apart, drone and other imaging technologies are being used to assess risk, damage, and settle claims.
Although we have enlisted the challenges and current technologies that are solving those challenges. We have barely scratched the surface in terms of the potential of technology in changing the landscape of claims management. There are more technologies like blockchain, artificial intelligence, and deep learning which are not covered in this write-up. Going forward, we are likely to see major changes in the way insurance companies transact with customers.
With technology making giant strides, the insurance industry is likely to be transformed by automation in major areas and there will be less dependence on manual intervention going forward. While this may be a call for celebration, it also will be synonymous with the loss of many jobs in the sector. Many companies are likely to lay-off staff to become lean and nimble to compete in this space with new Insuretech companies that found on the bedrock of the latest technologies.