How insurers will handle claims in this digital decade
The beginning of 2020 is a good moment to reflect on the next decade in the insurance sector. This is the third and final part of a series of three main topics: distribution, underwriting and claims. How will insurers handle claims differently in 2030 than in 2020?
Processing claims will always be a major function of insurers, but the way it’s done will shift from human to automated. It’s expected the number of people involved in the handling of claims will drop with 60 to 90 percent (between 2020 and 2030). With intelligent algorithms, claims will be routed in order to increase efficiency and accuracy. Claims for personal lines and insurances for small business can and shall largely be automated. This way a huge amount of work can be done in a matter of hours instead of days today.
The traditional, manual methods of first loss notification will be replaced by sensors from the Internet of Things (IoT) and data capture technologies, such as drones. Let’s say a policyholder has a car accident. He/she can take a video of the damage, which is then translated into loss descriptions, repair work and estimated amounts. Belgian insurtech company thewave (http://thewave.tech/) for example, is currently developing a bot to support the first notification of loss process in case of a car accident. Tractable (https://tractable.ai/), a London-based insurtech startup has developed an AI algorithm which can identify any external part of any vehicle, score its condition, and determine whether it ought to be repaired, replaced or left alone. They have taken hundreds of millions of photos and paired them with estimates to come to this result.
Automated customer service applications will interact with policyholders through voice and text, in systems linked to the necessary follow-up. Claims handled by humans will be the complex, unusual ones. But of course, also in those cases, humans will be assisted by new technologies and data-bases analysis. Those new technologies can also be used to speed up loss estimates in case of large-scale catastrophe claims, so as to fasten the flow of reinsurance capital.
The focus on monitoring, prevention and risk mitigation will strengthen. IoT and data sources are used to control the risk and to monitor certain parameters. When those parameters exceed defined thresholds, interventions are triggered. This way potential losses are avoided or minimized.
Think for example about the monitoring at homes of water levels, temperature and other key risk factors. This way tenants and insurers can be warned of problems before they arise. The interventions for inspection, maintenance and repair can be triggered automatically. Shayp (https://www.shayp.com/) for example, is a Belgian Fintech company that was founded in 2017 and tackles water loss in buildings with an easy to install IoT water monitoring application that assesses the costs of leaks in buildings and automatically dispatches maintenance services when deemed profitable.
More than insurance
The logic towards prevention opens a new field for insurance companies. Insurance companies look for mitigating actions and new revenues to absorb the improvement of claims frequency thanks to technology and IoT. Insurers can extend their scope to services in advice, assistance, prevention, … They can create ecosystems of companies or services, a network economy.
Belgian insurer AG has started ‘SoSimply’, a repair service for basic home maintenance (https://www.sosimply.be/fr/ ) and Phil@Home, a complete assistance framework for elderly people, so they can stay in their own home as long as possible (https://www.philathome.be/fr ).
These services originate in the insurance related business: data about risks and prevention. But they create an integrated and effortless customer journey, eliminating the potential frustrations of the client. A complete ecosystem is foreseeable, with different services and products build around one client and in response to his/her specific needs and situation.
Related to this, it should be kept in mind that all new technologies will reduce the claims cost for non-life insurance solutions: car, home, health care, … In car insurance the trend is visible since recent years: the claims frequency is reducing because technology makes cars safer. The same effect can be expected concerning the protection of houses and of human health with new technologies.
How to prepare for this future?
Where the insurance sector is heading, is already visible. But how to get there as an individual company is not easy. It all starts with getting ‘smart’ on the existence and the possibilities of new technologies and to look for examples of new trends, worldwide. At the highest level of the company, the business model of the company has to be questioned.
The next step is the development and the implementation of a strategic plan: where will we innovate, how will we innovate, do we need help, … Where can we use our present strengths to be a leader in the future? Important priority: how can we increase consumer satisfaction in this process?
One part of the strategic plan is the development of a data strategy. Data is the new petrol in many economic sectors and certainly in insurance. We’ve discussed this need in the two previous blogs of this series. https://www.ensur.be/blog/how-to-distribute-insurances-in-this-digital-decade and https://www.ensur.be/blog/how-to-organize-underwriting-of-insurances-in-this-digital-decade
And of course, part of the new strategy is a new HR-policy and a new technology infrastructure (IT) to be capable of exploring these new possibilities and markets.