By now, you’re likely familiar with the term “insurtech,” which refers to the use of technology to create efficiencies in the traditional insurance model. Mostly we’ve witnessed these efficiencies on the underwriting side of the house, but we’re now beginning to experience it in claims. Many startup and traditional insurance companies are seeking to improve ancillary and primary claims services, and change the claims paradigm altogether through the use of technology.
When it comes to thinking about implementing technology in the claims process, there are several things to consider when answering the who, what, when, how, and why. Among the many considerations, the three most critical variables are user experience; efficiency gain; and resources.
It seems that every new entrant into the insurtech space is accompanied by the boast of some “cutting-edge” innovation designed to either automate or eliminate certain parts of the claims process. Conceptually, these innovations seem customer-focused, well-intentioned, and just flat-out cool. Depending on your claims organization’s approach to handling losses, customers may find aspects of the current processes time-consuming, inconvenient, and redundant (how many times have customers had to answer the same questions your first notice of loss (FNOL) representatives asked them moments before you called them?). Using technology to reduce the inconvenience of some of these tasks is a good idea, but it’s not a panacea and, if not done thoughtfully, may actually create more work for the customer and claims professional in the long run. As a matter of fact, we’re beginning to see states address this exact issue. For instance, as recently as October 2019, Oregon state regulators have accused auto insurance carriers of using improperly investigated photo estimates to make artificially low settlement offers.
Let’s first examine this from the policyholder’s perspective. After doing some research, a prospective customer decides to purchase insurance through insurtech company “X.” It was a frictionless buying process (“I got a price with just my name and address? That was so easy!”) and even resulted in money saved. Now let’s imagine that, a few weeks after purchase, the worst happens: The insured suffers an accident and needs to report a claim. He opens the insurance company’s app on his phone to start the claims reporting process, and is guided through the FNOL and asked routine questions—the app even provides instructions on how to take photos of the damage. Within minutes of the policyholder uploading the photos, the app is able to identify the damage and how much it costs to repair. It then generates an estimate, and payment is immediately issued to the policyholder electronically. Pretty cool, right? This is an interesting solution to enhance the customer experience and resolve those high-frequency, low-severity claims within minutes. But does it really end there?
We need to be mindful that when implementing technology similar to what has been described above, there are potential caveats. What if it’s not a run-of-the-mill claim? What if there is hidden damage behind the panels? What if the body shop that the policyholder takes his vehicle to for repairs disagrees with the estimate and refuses to perform the work? In either of those cases, that once-closed claim now has to be reopened. The burden shifts back to the policyholder to notify the company that the claim needs to be reopened, coordinate the reinspection, and facilitate the conversation between the body shop and carrier. The case can obviously be made that this well-intentioned design has actually created more inefficiencies and lessened the customer experience.
Is this the right way that we should be thinking about technology’s influence in insurance? Should we not instead think about technology as a way to create efficiencies for claims professionals so they can spend more time focusing on more complex issues or just taking a little extra time to provide world-class customer care? I bet those who have handled claims could write a laundry list of administrative tasks they perform every day that provide no real benefit to the insured or to file handling, but it must be done to maintain compliance, data integrity, or otherwise. Think about it in the case of sending status letters for open claims. What if this was not only automated, but also it generated a file note and uploaded a copy of the letter to your electronic file cabinet? If you’re completing any part of that process manually now, maybe it takes 30 minutes of your work day. That is 2.5 hours per week and 130 hours per year. Multiply that number by how many claims professionals are within your organization and it’s not hard to understand the cost savings as well as efficiency gained by the claim staff when a process like the one suggested is implemented.
Resources must also be a consideration; it’s arguably the most important factor to consider. Selecting and implementing claims technology can have consequences beyond just claims handling. Take, for instance, the potential implementation of a new claims platform. How will it be fed policy data? Will it be able to integrate with the company’s medical audit and estimating software? Will the IT department revolt because it uses poorly written or incompatible code? Oh, and one more thing—how much is it going to cost?
Claims is in the midst of a technological evolution, and it’s pretty exciting. Some early adopting organizations have already begun this evolution, while others may be waiting to implement until the price of the technology reduces or, worse, they may think this is all just a passing fad. Either way, we’re a far cry from the days of handwritten file notes and Polaroid photos, so let’s not pretend that the way we’re currently handling claims will proceed into the future.