Incumbents must Digitise Claims Process to Protect Market Share

November 13, 2022

New technology can help P&C (re)insurance carriers generate insights into loss trends, analyse and leverage claims reserve data, and better monitor performance across their portfolios.

For the broader (re)insurance industry, Covid-19 not only resulted in claims running into tens of billions of dollars, but also – as crises so often do – created or accelerated new opportunities. Drastic lifestyle changes had a direct impact on many areas of the (re)insurance market. For example, the cyber risk market witnessed a big uptick in ransomware attacks and targeted criminal activity. The shift to remote working, also significantly heightened the threat posed by network security vulnerabilities. The fallout has been skyrocketing rates for more complex classes of businesses like municipalities and manufacturing.

The insurance industry as a whole is in the midst of a radical shakeup. One of the many factors driving this is that customers are turning to digital channels and technologies like the connected car, smart home solutions, and multiple devices plugged in to the internet of things (IoT). We are rapidly moving into an era dominated by new products built on data and analytics.

Insurtech challengers like Lemonade in the US, Youse in Latin America and Nexible in Europe have shown that chatbots and other digital applications can be used to turn buying a policy or filing a claim into a more user-friendly process. These new ways of interacting with policyholders present a radical challenge to more traditional insurers. The shift could prove as transformational as the move from black and white to colour TV.

With new insurtech competitors on the hunt for customers, traditional insurance incumbents must move quickly to integrate digital technologies into their own operations. For the P&C insurance sector, digitising the claims function is a key focus of both challenge and opportunity. To capture the value of digital, P&C claims functions must transform themselves into customer-centric, digitally enabled organisations that excel in the three foundational aspects of claims: customer experience, efficiency and effectiveness.

The run-off market is swallowing up businesses that are unable, or unwilling, to write new business. There are many reasons carriers might find themselves in this position: lack of profitability, non-core underwriting business in their portfolio, a change in strategic vision, a really bad underwriting year (or years). Run-off faces its own particular challenges, of course. Not the least of which is the suspicion that legacy claims are not always administered as efficiently or fairly as they should be. This may unfair, but perception often passes for reality.

Ultimately, reputation matters, especially in the eyes of the end client. This makes having a best-ofbreed claims management system more important than ever. If due care and attention is not paid to each and every claim, regulators are paying increasingly close attention and won’t hesitate to step in. That’s not to say, of course, that global run-off firms aren’t paying scrupulous attention to treating their customers fairly – or that they don’t have excellent people in place to ensure smooth and orderly operations.

But moving away from legacy technology and making a major investment in a state-of-the-art CMS can help demonstrate to auditors, regulators, policyholders and the media that a firm is strongly committed to managing claims efficiently, professionally, promptly and fairly. Automated digital technology can consolidate management information in one place, improve transparency, reconcile payments, assist adjusters looking to commence negotiations and commutation discussions, and offset outstanding balances with a long tail.

Digital claims automation reduces the friction that comes with the constant need to undertake essentially unproductive manual interventions. The latest claims tech is hugely impressive when it comes to generating insights, analysing and leveraging claims reserve data, managing approvals and peer reviews, and raising the visibility of a portfolio. Claims satisfaction surveys consistently show that customers expect a speedy intuitive technology platform that provides process transparency. This implies that any digital redesign of a claims journey needs to go much deeper than making superficial process improvements.

A report from McKinsey & Company highlighted how Spanish insurer Adeslas achieved an end-to-end digitisation of its claims journey, implementing features such as multichannel first notification of loss (FNOL), automated claims segmentation, and digital claims status tracking. McKinsey argues that digital technologies can unlock value and improve the customer claims journey at every stage in the process, suggesting that claims leaders should be able to examine each step of the journey and develop an ‘aspirational future state for claims that is unconstrained by potential short-term, technological barriers’.

Digital solutions can provide both a data-driven as-is view of a technology system and processes and a smart claims processing engine. The technology provides a visual overview of the whole claim journey, highlighting claims throughput, processing time, and turnaround time. Leading players in the motor sector can now estimate a vehicle’s damage value in real time, at FNOL, based on pictures submitted by customers or a damage description. This capability relies on applying the latest advances in AI and picture recognition.

AI can help identify the optimal claims-handling process for a specific claim. McKinsey reports one global insurance carrier, for example, that has leveraged AI to derive business rules that identify clear and simple claims cases suitable for an automated process. An Italian insurance carrier has developed a best-match routing approach to find the best claims handler for a specific case, which significantly improves its claims-handling accuracy.

In another example, Allianz’s Global Digital Factory, has created a digital delivery hub to achieve change through digital projects, such as developing claims solutions, across its international operations. For a forward-thinking claims management systems provider like DOCOsoft digitisation offers a range of new possibilities that we are actively exploiting to help our global P&C carrier clients operate more efficiently and gain competitive advantage.

Aidan O’Neill is the chief executive officer of DOCOsoft. He can be contacted at: