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First Up: Losses, Reserves and Emerging Technologies
It has been a tumultuous year for insurers. Complex regulatory changes (with more on the horizon), severe weather events, the incursion of disruptive newcomers and technologies, and the increasingly high expectations of customers have confounded the landscape. Insurers must contend with all of this while adapting to an environment of higher catastrophe and auto claims and stubbornly low interest rates.
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InsurTech comes of age
The annual Strategy Meets Action report, 2018 Strategic Initiatives: P&C Commercial Lines, points to a transformation of the P&C sector, finding that, alongside exploring traditional initiatives, such as modernizing core systems, improving customer service and expanding distribution channels, insurers are planning major investment in new business models and initiatives. This includes digital transformation, innovation and emerging technologies. KPMG predicts that 2018 will be the year when insurers take InsurTech from proof of concept to production. Change is expected to come in many forms, and one of the greatest challenges to insurers is adapting to this complexity and making the most of emerging technologies and methods. Digitization is enabling online distribution, allowing insurers to reach a younger demographic that expects instant access to applications, claims and renewals from a smartphone. As highlighted in Deloitte’s 2018 Insurance Industry Outlook, underwriting digitalization could encourage policy purchase by those discouraged by the traditionally long and complicated life insurance application process. Applications for life insurance policies were more likely to be completed when conducted in real-time. When the data gathered from digital sources, smartphone apps, wearables, telematics and the internet of things (IoT) is processed by sophisticated analytical programs, premiums can be tailored to the person in minutes rather than weeks. As an example, insurers are making investments in artificial intelligence (AI) and machine learning, data mining and predictive analytics to more quickly gather insights from millions of pages of claims documents. The result means delivering better outcomes to agents, policyholders and claimants. Digital engagement between the insurer and insured is changing the nature of the relationship, sparking countless opportunities to provide value-added lifestyle feedback to customers and build brand loyalty. Proactive carriers are using reduced premiums and up-front subsidies to promote the use of technology that offers security, safety and health benefits to customers. Price satisfaction scored higher among customers who participated in telematics programs, even when they experienced increased premiums. Yet the challenge ahead is in not only making sense of data and analytics, but taking the opportunity to create a new paradigm for the industry. AI needs to be applied in a way that informs new processes.
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Automation and innovation
Robotic Process Automation and Cognitive Intelligence software can improve the productivity of staff conducting routine underwriting, claims handling and analytics tasks, or take over those tasks entirely. Virtual agents can already have natural conversations with customers, answer a variety of questions and collate a wide range of data. It is estimated that insurance and finance have a 43% automation potential, according to the McKinsey Global Institute (MGI), particularly in data processing, customer interface and analytical expertise. Carriers are leveraging automation to improve all aspects of the claims process; those who are slow to adapt will be left behind by innovators and early adopters.
The future of auto insurance
Change is seldom easy, and innovation has its pain points. The adoption of advanced driver assistance systems (ADAS) that involve automatic emergency braking, adaptive cruise control, blind-spot detection and lane-departure alerts will certainly reduce the severity of accidents and improve premium price efficiency, but also drive up cost for repairs by up to five times, as reported in the Wall Street Journal. Longer wait times for customer service may be in the works for when these glass-mounted cameras, microprocessors and multiple sensors need recalibration, with some speculating that adjusters will claim more vehicles as total losses, as reported in AutoWeek. Insurers have estimated that as more vehicles are fitted with collision-avoidance technology, the reduction in accident frequency will offset the increase in repair costs. Last year, as reported by Reuters, only 19% of new vehicles sold came fully equipped with ADAS, so there is plenty freeway for growth. The introduction of self-driving cars will also have a marked impact on accident severity and frequency once the teething problems have been worked out and market saturation reaches a significant level. Insurers may want to establish a firm foothold in this nascent industry in case producers of smart cars decide to bake-in insurance to the final sticker price, as Tesla has done in Asia.
Blockchain: champion of data integrity?
The blockchain has much to offer in the fight to secure data integrity, preserve accuracy and drive efficiency, particularly in the wake of a disaster when communication and access to data can prove a major obstacle. The decentralized digital ledger used for authenticating and transacting without intermediaries has won admirers worldwide, including banks, credit card processors and the Big Four accounting firms. IBM is working with mainstream carriers to bring blockchain technology to the insurance market. Insurers can face a difficult decision. Do they choose to take the risk and potential upshot of being early adopters, or should they take a wait-and-see approach to how the tech eventually develops to maturation? Only time will tell whether blockchain, IoT and other smart innovations can live up to their early promise. This is a time of great challenges, but also of great opportunities. Insurers who innovate and adapt may well likely improve their bottom lines and make strides in differentiating themselves from the competition.
The blockchain has much to offer in the fight to secure data integrity, preserve accuracy and drive efficiency, particularly in the wake of a disaster when communication and access to data can prove a major obstacle... more
Change is seldom easy, and innovation has its pain points. The adoption of advanced driver assistance systems (ADAS) that involve automatic emergency braking, adaptive cruise control... more
Robotic Process Automation and Cognitive Intelligence software can improve the productivity of staff conducting routine underwriting, claims handling and analytics tasks, or take over those tasks entirely... more
The annual Strategy Meets Action report, 2018 Strategic Initiatives: P&C Commercial Lines, points to a transformation of the P&C sector, finding that, alongside exploring traditional initiatives.... more
InsurTech comes of age Automation and innovation The future of auto insurance Blockchain: champion of data integrity?
Losses, Reserves and Emerging Technologies
Up Next: Visionary Insights
- William Brower VP, Product Management
"The greatest challenge the claims industry will face will likely be the actual transformation to claims automation. It's hard to change and even harder to know which technology to adopt to achieve full claims automation, as new claims technology seems to be introduced every week."
- Aaron Latto, Esq. Senior Vice President
"The industry must keep up with its customers. The insurance industry has a 300-year-old business model, whereas the rest of the business world has undergone multiple transformations in that time. Our customers are moving fast—much faster in many respects than our industry is moving."
- Jason Verlen SVP, Product Management and Strategy
"I think the biggest challenge facing the industry is the need to incorporate a staggering amount of data and insights into new processes that deliver against consumer expectations."
Leaders of CCC, Great American Insurance Group and LexisNexis Risk Solutions share their insights on the outlook of the claims industry and important considerations to address now.
Visionary Insights
Up Next: CCC Information Services
Future Challenges
<< Previous: Adjustor Workforce
What do you see as the greatest challenge the claims industry will face in the next five years, and how is the industry addressing this issue?
I think the biggest challenge facing the industry is the need to incorporate a staggering amount of data and insights into new processes that deliver against consumer expectations. That data is high frequency, coming from a multitude of streams, and it’s overlaid by rapidly evolving models for vehicle ownership and personal mobility. The challenge is not only making sense of these data and analytics — it’s taking this opportunity to create a new paradigm for the industry. AI won’t solve this on its own; it needs to be applied in a way that informs new processes. We’re actively working on innovative ways to harness data and analytics to deliver a completely new experience for everybody involved — the consumer, as well as the employees who process the workflow at every touchpoint.
Adjustor Workforce
How are you addressing the aging insurance workforce and the need to hire and retain new adjustors?
There is a gap between the number of people retiring and the number of people choosing this career path – but the work of the adjustor still has to be done. The application of AI, coupled with estimating logic, can guide the adjustor through his or her workflow. We’re injecting AI to provide relevant information at key decision points through the workflow, and we have data available for every major vehicle brand and body type. This will increase the number of estimates that an adjustor can accomplish in a day.
<< Previous: Technology for Claims Processes
Next: Future Challenges >>
Technology for Claims Processes
How are you using technology to improve the claims adjustment and approval process?
Claims adjusting and approval are important aspects of the claims process, but there are other decisions and touchpoints that can benefit from new technology. We are creating a “smart digital” experience for consumers — one that is completely modernized and based on three core capabilities: mobile, artificial intelligence (AI) and the Internet of Things (IoT). Consumers will experience many of these new workflows through their mobile phone, with AI powering many workflows behind the scenes, enhancing efficiency, accuracy and cost effectiveness. IoT references telematics in particular — not just the collection of connected data, but processing that data to make it useful to insurers. These three concepts are the building blocks of transformation and create a new standard of consumer expectations. From detecting damage to enabling virtual desktop estimating and smarter audits, we’re improving every touchpoint of the vehicle lifecycle and are committed to transforming our industry and helping our customers deepen engagement with consumers.
Next: Adjustor Workforce >>
Jason Verlen SVP, Product Management and Strategy CCC Information Services
Expert Insights
Up Next: Great American Insurance Group
The industry must keep up with its customers. The insurance industry has a 300-year-old business model, whereas the rest of the business world has undergone multiple transformations in that time. Our customers are moving fast – much faster in many respects than our industry is moving. How does that present challenges for claims? It means that we must deliver rapid outcomes with greater transparency. In other words, how do we get to final payment faster and more openly? Our claims digital strategy aims to do just that. We are augmenting our specialist staff and unparalleled subject-matter knowledge with investments in technology and a customer-focused approach to our work, which is rooted in Lean business principles. This creates more value for customers with fewer resources and less waste. But make no mistake – our employees’ expertise and passion to serve specialty niches will always play a key role in our claims philosophy. At Great American, we like to say that with expertise like this, “we live it,” and it’s hard to tell our people from our policyholders.
Attracting new talent to the claims profession means engaging prospective employees on the question: why build a career in insurance? We are posting a series of interviews with early career professionals who offer their perspectives on what brought them to insurance, and the aspects of their jobs that they find most interesting and challenging. It’s key to highlight insurance and claims as a career path that is personally and professionally rewarding. We’ve had a hands-on claims trainee program for years. Now, we are moving trainees into an agile workspace to foster collaboration. We are also deepening our investment with a trainee graduate program that provides enhanced opportunities for early career claims professionals, creating a pool of more experienced talent who can accept key roles at an earlier stage. Lastly, we foster networking opportunities across the organization. Our Bridges group assembles trainees and graduates from the Claims, Underwriting and Human Resources training programs to enhance cross-functional knowledge and networking across various roles and disciplines.
Great American is investing in data mining and predictive analytics to deliver best in class claims service and outcomes to our agents, policyholders and claimants. The goal is to leverage technology at key points in the claims process to make our specialist claims professionals even more effective. We are also using emerging technologies to respond more quickly to catastrophes, combining analytics with decades of investigative experience to better detect claims fraud, and working to engage artificial intelligence and machine learning to more quickly gather insights from millions of pages of claims documents.
Aaron Latto Senior Vice President Great American Insurance Group
Up Next: LexisNexis Risk Solutions
The greatest challenge the claims industry will face will likely be the actual transformation to claims automation. It’s hard to change and even harder to know which technology to adopt to achieve full claims automation, as new claims technology seems to be introduced every week. At LexisNexis Risk Solutions, we know that one size does not fit all insurers. Therefore, we work hand-in-hand with our clients to identify the workflow problem, map out pros and cons of each corrective technology option and support the technology selected with the most robust data and analytics in the industry. LexisNexis Risk Solutions provides several turn-key solutions, such as auto telematics and drone images for home claims to help clients reduce the demands on their limited IT resources. We provide insights across the industry about solutions that help clients create successful technology, data and analytics roadmaps for today with tomorrow in mind.
Retiring baby boomers are a major challenge for the insurance industry. LexisNexis Risk Solutions delivers real-time actionable data into the claims workflow to help less experienced adjusters make the right claims decisions. Our Claims Medical Discovery solution quickly identifies medical providers that show signs of engaging in fraud, waste and abuse. Currently, the most experienced adjusters can detect questionable providers during the claim process – a skill that is difficult to teach and takes years to acquire. Our solution can help flatten the learning curve and replace lost experience. When a provider treats or bills outside the norm for their local peer group, our solution quickly provides a score with attributes. Alerts about questionable providers are especially beneficial for new adjusters; data and analytics aid experienced and inexperienced adjusters with data-driven decisions. Whether automating the FNOL process and liability decision, segmenting medical claims for no-touch processing or providing alerts to immediately identify potential fraud risks, our vast data assets and innovative analytic solutions help power the shift to claims automation.
LexisNexis Risk Solutions is leveraging technology to bring data and analytics into the early phases of the claims workflow so carriers can automate the claims adjustment process. This includes bringing real-time data into First Notice of Loss (FNOL) to simplify the claim report process. Our claims solutions electronically verify customer information and provide information to include contact, vehicle and coverage details in seconds. Insurers can simplify the first report by reducing customer questions. Claims adjusters receive third-party information so they can quickly contact involved parties and notify at-fault insurers to accelerate subrogation. Using proprietary data sets, we provide insights on individuals to aid in the identification of potential fraud risks at inception. We expedite claim investigations by automating system-to-system police report orders. We can even bring data elements from the police report directly into the insurer’s claims system. We provide real-time data throughout the claims process, envisioning a future touchless claims process for non-complex claims.
William Brower VP, Product Management LexisNexis Risk Solutions
First Up: LexisNexis Risk Solutions
