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Future of claims
Digital claims processing: Hitting the reset button in insurance
Until now, failure to integrate cutting-edge technology or adapt to the increasing pace of technological change did not significantly affect profitability in the insurance claims process. But to meet changing customer demands in an increasingly technology-centric world, enhanced service delivery capabilities are now key to creating a nimbler organization that can quickly adapt in the face of continual change and uncertainty.
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- Factors shaping the future of claims
- The insurance claims process: Core to the disruption
- Priming the digital claims processing service delivery model for change
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Reset: Factors shaping the future of claims
Some see standard home and auto insurance policies as commodities, while commercial policies are perceived as more nuanced. In reality, the product itself is often less important than the end-to-end customer experience insurance companies create. Customer expectations and purchasing patterns have been evolving at an accelerating pace.1 At the same time, Millennials have become the largest generation in the workforce. Both of these significant shifts have created new needs that must be assessed and met.
Even before the COVID-19 pandemic, customers were leading increasingly technology-centric lives that required insurers to transform service delivery and operating models. With the demands and constraints of the pandemic, a technology-enabled service delivery with a digital claims process is nonnegotiable and mission-critical. In the past, these needs may have gone unmet due to lack of technology solutions or an insurer’s inability to capitalize on technology, but the situation today is very different.
The insurance claims process: Core to the disruption
At the center of this insurance reset, the new growth engine is customer retention and loyalty, both of which are largely driven by customer interactions their insurers, specifically the claims experience.
Claims operations, which have been traditionally treated as outputs of a “reactive back office,” will have to become a powerful differentiator—innovative and uncompromising on customer service, with multifaceted talent and capable of driving strong results.
The key enablers for the likely future of claims are a combination of insurance claims process transformation, adoption of new technologies, a connected partner ecosystem, and a talent model that values technical claims handling and data science skills. Adoption of new technologies should reduce pressures of an aging workforce as no-touch insurance claims processing increases. At the same time, claims professionals will need greater technical fluency to take advantage of the increased volume and velocity of available information.
The four enablers
The first enabler: Insurance claims process innovation
Insurers will need the right end-to-end operating model supported by key capabilities. The design will depend on critical aspects of each insurer’s claims value chain, but the insurance claims processes will be driven by data from internal and external sources sent in near-real time and leveraged to drive advanced analytics, automation, machine learning, and artificial intelligence (AI).
These platforms and applications will increasingly be cloud-based, allowing better scale and the ability to collaborate with an ecosystem of partners who are best in class at their specialized set of services.
The second enabler: Technology
Preparing for this future of claims is not easy given the legacy technology platforms of most insurers, in which data is distributed across multiple disparate systems. Transforming to capitalize on many of the best-in-class solutions requires specialized expertise and resource capacity that insurers may not have while they continue to maintain existing legacy information technology ecosystems.
The third enabler: Connected partner ecosystem
The partnerships of tomorrow will focus on delivery of capabilities that optimize service delivery regardless of partner and shift the role of the claims professional from primarily being an information-gatherer to spending the majority of their time being the insight-enabled decision-maker.
To make this transition more seamless, insurers can actively seek to partner with insurtechs, who have developed the right technology and are looking for an industry partner to refine and scale their platform. Strategic and effective engagement with insurtechs requires a clear definition of the gap being addressed and a comprehensive impact analysis of this partner as an integrated part of the insurance claims processing operating model.
The fourth enabler: Talent
With the injection of enabled technologies, the claims workforce of the future will be a blend of human and nonhuman capabilities that will provide insurers with the flexibility they need to grow their business with a substantially lower cost curve. The current talent pyramid will also evolve with more talent deployment on knowledge-intensive, strategic decision-making.
Priming the digital claims processing service delivery model for change
Transforming into an adaptable insurer will require flexibility and agility, guided by a risk-based, test-and-learn approach. This will unlock short-term value through quick-win initiatives while establishing a flexible future-state service delivery model that allows insurers to take advantage of emerging technologies.
There are five steps insurers can take to begin this insurance claims process journey:
The first step to transforming the service delivery model is to develop a clear vision of where to steer the organization toward the future of claims and define the journey to get there. Define a clear claims strategy and determine the capabilities needed to enable it, recognizing that this is not a one-size-fits-all solution.
Insurers have multiple options for enabling digital claims processing, including implementing technology solutions, outsourcing to other vendors, and onshoring or offshoring to lower-cost locations. Understand current insurance claims processes to decide which service delivery method will optimize operational capabilities and organizational resources.
The insurance industry is changing rapidly, and building internal capabilities to navigate ever-changing terrain may not be the best option. Seek expertise from outside, including niche companies and startups that could complement your core capabilities. Insurtechs have proliferated and are at your disposal to forge strong partnerships and enhance your capabilities across the claims value chain.
Rather than launching large-scale transformation, identify opportunities to capitalize on stable technology while also considering paradigm-shifting solutions, such as AI or machine learning. Launch shorter, targeted sprints to gain confidence in the ability of the organization to plan, execute, and achieve (or exceed) projected savings while also gaining buy-in and increased cultural alignment.
In this constantly evolving environment, innovations may become obsolete from the time you identify the opportunity to when you complete the implementation. Regularly reevaluate your required capabilities to ensure they still meet market needs. Your execution roadmap should be a living document that is updated as market and customer trends continue to shift.
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