Claims processing is a procedure whereby an insurer receives, verifies and processes a claim/theft report submitted by a policyholder. It accounts for 70% of property insurers’ expenses. Furthermore, claims processing impacts customer satisfaction; 83% of customers who were dissatisfied with their last claims processing switched providers.
Despite the importance of claims processing, 80% of claims executives accept the fact that they miss important opportunities. Not to miss future opportunities, we want to highlight customer expectations and technological improvements that are changing claims processing, and present a method to develop an overall strategy considering customer expectations.
Figure 1. Challenges of claims executives:
According to McKinsey, insurance is the sector that customers need human contact the most to solve their problems. It is specifically correct for claims processing where policyholders experience a tragic event. According to EY, 76% of customers want to submit their claims preferably by telephone. Another research indicates that 22% of customers demand direct communication with experts. Thus, a large proportion of customers are not willing to submit their claims via digital media and they require human contact.
On the other hand, 22% business insurance policyholders prioritize fully digital claims processing when selecting a provider. Also, millennials and urbanites generally demand less physical interaction and prefer to consume digital services when possible in any industry. It is therefore plausible that, over time, there will be a demand for further digitization of claims processing. For example, millennials and post-millennials (those born after 1997) will make up almost half of the adult population by 2030. In this context, McKinsey predicts that more than 50% of claims processing will be automated by 2030.
Another issue is that there is a positive relationship between the amount of the loss and the need for human contact. In the case of minor accidents/thefts, policyholders tend to prefer fast digital claims processing. However, if the damage is severe, they need more human contact.
Such varied customer demands and its potential dynamism over time indicates a complicated dilemma for the insurers. Especially, if we consider the fact that we live in a world where word of mouth is amplified thanks to customer blogs and social media. According to Deloitte, 40 positive customer experiences undo only one negative customer comment.
Claims Handling with [VRS]™ Virtual Risk Space
Virtual i Technologies helps insurers assess risk and submit FNOLs more effectively thanks to their intelligent platform [VRS]™ Virtual Risk Space. For the case of claims processing, [VRS]™ as a digital platform provides the ability to submit FNOLs immediately via standardized or customized survey forms. With [VRS]™ an insurer can easily and instantly assign a survey form to the claims adjuster or end user. Policyholders can send real-time data from their smartphones to fill out FNOL without even downloading an app. The insurer can see the exact location and capture audio and visual data via a secure live video chat.
Virtual i Technologies team offers this technology as a subscription service without requiring a slow & costly IT integration project.
Figure 2. [VRS]™ as a simplified solution to complex insurance industry challenges:
Technological developments increase operational efficiency of insurance companies by automating claims processing and enhancing fraud detection. There are four major technological improvements that make this contribution:
- AI/ML models: These tools are transforming almost all industries and the insurance industry is not exempt. The subdivisions of AI/ML models facilitate claims processing as follows:
- NLP: Claims processing requires effective use of language. NLP-driven chatbots can automate the FNOL process by guiding policyholders to submit the required documents, including pictures of the damage. OCR is also good at deriving data from handwritten documents. Due to regulations, insurers still have to work with such documents when processing claims.
- Computer vision: models can estimate the cost of damage by evaluating videos and photos taken to submit a FNOL.
- Advanced analytics: are useful for detecting and preventing fraud via calculating coefficients which are associated with insurance fraud.
- Blockchain: Automates claims processing thanks to smart contracts, which are agreements stored on a blockchain that can be enforced by code. Also, thanks to authentication capabilities, blockchain technology helps fight against double dipping fraud.
- IoT/Telematics: The cloud of smart devices and telematics assists insurers detect fraud. IoT constantly provides data about the environment so that insurance companies can check whether the claims of policyholders are true or not.
- Custom Mobile Apps: Provides customers with a convenient way to submit their claims and track their status. With the increasing use of smartphones, custom mobile apps could be a promising tool for claims processing in the near future.
For more information how technology (AI based and others) improves claims processing you can read our article Top 7 Technologies that Improve Claims Processing in 2022.
How to set an optimal claims handling strategy based on customer type?
Technology obviously reduces the cost of the insurers. On the other hand, claims processing still requires human assistance in order to satisfy non-tech savvy customers or to resolve complex or highly valuable claims. Consequently, there is a tradeoff between:
- Reducing cost
- Ensuring customer satisfaction
- Ensuring high accuracy
for the case of the claims processing. In addition, this optimization process is a dynamic one thanks to improving technology and customer preferences changing in favor of more automated channels.
To identify the right approach for the right situation, insurers need to create a matrix with:
- The claims on the one side including their type (e.g. retail auto damage claim with minor damage), the user (e.g. user not preferring automated channels). Insurers can use behavioral analytics to understand the level of digital literacy and stress management of their customers and classify them.
- The claims processing approaches (e.g. fully automated chatbot with OCR support for end-to-end claims processing).
Such an exercise can help insurers identify the right approach for the right claim and increase the level of automation while delighting customers.
A riskier alternative to this approach would be to over-invest into building a delightful digital and automated claims processing flow and guide all customers into using it, rather than offering manual claims processes (e.g. digital platforms, the call center) for some users.
The article was originally published in the AI Multiple website and written by Görkem Gençer on January 26 ,2022.