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Harnessing the Power of Artificial Intelligence

Navigating the complex landscape of timed demands

November 15, 2022 Photo

There is a growing trend of states recognizing time-sensitive demands, which can carry extra-contractual exposures for insurers. Insurers are faced with large claim volume, excessively large demand packages, and time-sensitive deadlines imposed upon them by state regulators and agencies. The burden to review complex legal and health care documents is growing. Relying on business processes that are antiquated is no longer viable to keep pace with the increasing pressure. In today’s environment, where cloud technologies and artificial intelligence (AI) are transforming industries and less human interaction is the norm, carriers are seeking solutions to mitigate their exposure. Moreover, economic pressures to drive down costs, while increasing productivity and efficiencies, continue to be significant factors that will distinguish the insurance industry market leaders of the future.

Insurers are typically looking for ways to reduce claims processing time and increase accuracy that will result in loss adjustment savings and a reduction in liability exposure. With increasing pressures due to workforce shortages and skill set alignment gaps, the burden on insurers to abate implications from the time delays and mishandling of claims is exceedingly important. To circumvent these obstacles, insurers are implementing smart technology solutions driven by AI. Furthermore, market pressures continue to impact the vertical with several factors contributing to diminished combined operating ratio (COR): the value of vehicles, higher injury claims from medical inflation, increases in medical treatments, personnel expenses, and more attorney involvement in cases. Insurers know they have little control over these external market factors, so the adoption of new strategies and technologies is critical to streamline their operations and improve their bottom line.

This past summer, we saw the impact of market pressures on several large carriers, including Allstate and Berkshire Hathaway. Allstate reported a Q2 COR of 108, suffering a net loss of $1.04 billion caused, in part, by rising auto repair costs and higher injury claims. In August, Berkshire Hathaway reported a $43.8 billion loss, with its GEICO holding suffering a $487 million underwriting loss—its fourth straight quarterly loss. It remains to be seen how much of these costs can be pushed to customers who are already enduring escalated premiums. Carriers are already constrained from taking rates to offset rising costs, but they have locked in claims expenses and are forced to do more with less. Insurers are seeking innovative alternatives, using widely available cloud-based solutions to help them reinvent how they process claims and drive down their costs.

Insurers must respond to these pressures. Companies are embracing technologies and automated processes to help them transform their operations and make them more customer-centric while minimizing the inherent risk of timely claims processing. Cloud platforms with automated workflows, fueled by AI, are revolutionizing claims processing, and insurers are reaping the benefits by adopting new technologies that mitigate the costly risks and time associated with a formerly manual process.

Today’s market demands agile solutions that are scalable, customizable, mobile, secure, and friendly. In our work-from-anywhere environment, insurers need app-friendly solutions that go with their claims representatives wherever they are. We are witnessing a complete transformation in how claims are processed, and, as a result, the risks and pain points that were associated with manual claims processing are virtually eliminated.

There is a series of manual steps when working through the typical insurance claims process related to a bodily injury demand package. The insurance company mailroom receives a demand package. The demand is then scanned into a data repository and a task is set within the claims management system for the claim representative. The claim representative finds his diary in the 150-250 pending claims and begins the review of the demand package, which may be 100-250 pages. After visually inspecting the document for keywords, phrases, and values, he determines the next course of action. The cycle time for this process runs about five days and is inherently error-prone and risky for carriers. The increased exposure and expense for carriers to manage the burden of time-sensitive demands highlights the need for change, and the once-standard claims processing procedure is being replaced with AI and automation.

Touchless claims experiences are transforming the process, and market leaders are moving to this new paradigm. Automated, AI-driven claims processing is happening in a matter of seconds–not up to five days, which is quite typical for just one demand package that could be upwards of a few hundred pages. What is even more significant than the time saved is the reduction of risk. By eliminating much of the human interaction when processing a claim, errors are reduced. Technology is enabling carriers to seamlessly extract, analyze, search, and manage huge datasets from legal and health care documents. Within seconds, carriers can review results, reporting, and diaries, and escalate known risks and complete a direction to pay.

High-risk claims can be quickly identified and escalated efficiently and effectively. Carriers dramatically reduce exposure, errors, and cycle time, and fully automate their legal document import, review, triage decision, and escalation processes. Liability severity exposure, loss adjustment expense, processing accuracy, and employee risk management are all favorably impacted. 

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About The Authors
Multiple Contributors
Edgar Meza

Edgar Meza is vice president and chief claims officer at Fred Loya Insurance. edgar.meza@fredloya.com

Michael J. Sturgis

Michael J. Sturgis is president and CEO of SCI 360.  msturgis@sci360degrees.com

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