Blog: Digital claims - The final frontier

It’s an irony of the pandemic’s effect on insurers that most assessments of state of the personal lines market before Covid-19 hit included phrases such as ‘hyper competitive’ and ‘under pressure from all sides’. 2020 then took these pressures and magnified every single one. The pain was particular for those where systems and operations were built on a legacy of pre-cloud co-location. However, the ‘what now?’ question for the industry points squarely in a simple – but often uncomfortable – direction: operational efficiency.

This efficiency is not so much at the front end of sales, underwriting and onboarding. That is usually in the hands of online distribution channels already. It is at the back end: the control and handling of claims and especially the way that information flows through the organisation, out to supply chains, back in and then to the customer.

As a business we describe this as ‘digital claims’. For the industry, that sometimes translates as electronic first notification of loss but in truth online claim forms are like the punched cards fed into the first computers. They are simply instructions; the power of digital claims is everything that those instruction trigger. It is in the rationalisation and automation of everything within a claim that the greatest operational efficiencies for insurers are gained.

A few facts. First, during 2020, online shopping and interactions by the public took a huge – and irreversible – leap forward. The Amazon model of customer contact and interaction now sets the standard. Second, claims that move fast and efficiently when notified to an insurer reduce their indemnity costs as well as their operational costs. Finally, claims efficiency is the final frontier to drive competitive edge.

The last fact might raise a few eyebrows but regulatory pressure is rising on risk-free income and the sale of add-ons. Aggregators have increased margin erosion and differential underwriting profits are now very difficult in the big data world, where so much knowledge is shared.

Accessibility

The last key left to try in the lock is fully integrated digital claims handling where a single complete record of every claim – including pictures, videos, documents – becomes accessible in full or part to every party involved.

Not only does re-keying vanish, but such a system can easily be set to notify every party by email or SMS whenever anything moves on the claim. This doesn’t require banks of call centre agents, just well thought out decision trees and rules.

How digital is your claims handling? Is it possible to settle simple claims with straight-through processing without any human involvement. Is information passed between separate systems losing time and knowledge in the process? Can your eFNOL handle anything a claimant throws at it?

These are the questions every insurer facing the reshaped post-pandemic battlefield needs to pose.

It is operational efficiency that will drive expense ratios down and so profitability up. It is also claims systems that can cope without missing a beat if a new variant pushes us again into lockdown.

The front end of personal lines is like a gold rush town where the gold has already gone. The next frontier for pioneers is claims and it may be the last.

To take Insurance Post’s short Digital Claims survey, click here

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