Efficient claims management is the holy grail for insurance companies. Poor claims management can increase insurer’s costs significantly, eating up almost 80 percent of the revenue earned from premiums. As a result, a growing number of insurance companies are turning towards digital claims management solutions to increase profits and gain a competitive edge. These solutions make the most of the growing amount of information and advanced technologies to streamline the end-to-end claims management process – from claims reporting and investigation to settlement.
Technologies powering digital claims management
A slew of insurtech companies have adopted the digital operating model to cut down on claims processing costs and offer an enhanced customer experience.
1. Artificial Intelligence
Savvy insurers like Lemonade are leading the way by using digital technology to simplify its claims processing. Designed on AI and behavioral economics, the insurer promises that all you need to make your claim is a smartphone. From an insurer’s perspective, AI is driving cost-effectiveness to a whole new level. The UK-based Tractable is using AI to not just help adjusters make informed decisions on necessary repairs but also in averting claims. In the coming years, deep learning and cognitive technologies will help disentangle complex claims by constantly learning and adapting to the world around them. By replacing 34 of their FTEs with IBM’s Watson Explorer to read documents and make settlement conclusions, Japan’s Fukoku Mutual Life Insurance is striking gold at cost-efficiency even as you read on.
Using artificial intelligence to capture damage and audit payout, insurers can expedite settlements while providing a better experience for their customers. Telematics and wearables are already creating an avalanche of data that will make deep insights accessible to help customize premium plans based on daily activity, locations visited, and potential risks. Equipped with NLP (Natural Language Processing), chatbots like Elfaris are making it simpler for customers to check the history of filed claims and stay updated on their payment status in real-time.
2. Internet of Things (IoT)
With the potential to offer real-time customer data, IoT is transforming the insurance industry with active loss-prevention techniques. A study by the Boston Consultancy Group estimates that US insurers could reduce annual claims by 40 to 60 percent, just with the real-time data smart devices provide. Connected vehicles, HAL drones, and remote sensing technologies are already equipping adjusters with tangible data to make swift settlements. Smart sensors in connected devices offer rich data about customers and their environments that can be used to combat future loss in both the individual and commercial insurance sphere. Usage-based Insurance (UBI) is yet another trend ignited by companies like Nexible in the UK and Progressive in the US.
Progressive is among a throng of many car insurers using telematics to determine a customer’s premium based on their car type, driving patterns, potential traffic, etc. Erie Insurance uses drones to determine the premium and indemnification for a property damage claim. This works as a winner for both parties as it reduces claim management costs involved in adjusters visiting dangerous sites and helps reduce premium costs for customers. The Spanish company Adelas, is another digital pure-play company that has digitized its claims journey with automated claims segmentation, multichannel FNOL (First Notification Of Loss), and digital claims status tracking.
Wearables, nearables, and hearables are three key technological innovations that feed insurers with tons of data to gauge a customer’s ideal premium rate among other analytical benefits. Blood-sugar-tracking contact lenses, biometric health tracker tattoos, and ingestible sensors that send information from inside your body to your smartphone are the future as we will soon know it.
Connected devices such as wearables, nearables, hearables, and ingestables will aid digital insurers in the following:
- Identify customer segments and categorize products and services accordingly
- Offer customized premium pricing and flexible rates based on a wealth of location, health, and environment data
- Recognize and update the latest information on a policy holder’s database
- Detect fraudulent activities using photos, audio, video or any other form of qualified data
- Generate real-time claims management by an adjuster
All these aspects will result in potentially reduced claims cost and turnaround times. Oscar Insurance is one such firm incentivizing its policyholders with Amazon vouchers for accomplishing well-being goals. Similarly, John Hancock offers discounts on premiums for those who meet their Fitbit tracker targets.
With a gamut of opportunities under its belt, blockchain is expected to bestow significant benefits across the insurance value chain. In claims management, this technology is expected to influence fraud detection and risk prevention the most.
Fraud detection and risk prevention
Forbes states that an estimated 5 to 10 percent of all claims, in general, are fraudulent which, according to the FBI, costs US health insurers more than $40 billion per year. That’s why this technology is being recognized as a critical tool to verify information and minimize health insurance frauds. Similarly, P&C (Property and Casualty) insurers are also evaluating blockchain technologies in terms of error and fraud reduction, and ultra-safe cross-border payments.
Claims prevention and management
The ability to make claims forms, police reports and other external reviews about a certain geography instantly available to third parties is what makes blockchain a robust platform. With access to scores of such data, insurers can choose coverage-worthy localities wisely. As far as management is concerned the technology is already equipping insurance companies to access the same information through a distributed network, thus allowing them to slash administrative costs and catalyze settlement time.
Digitization is the answer to a myriad of claims management issues, right from time-consuming, documentation-heavy processes to fraudulent claims and settlement errors. With rising competition from insurtech startups, embracing a new wave of digital claims management technology will soon become a mandate not just for success but for survival as well.
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