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Property/casualty claims is destined to transform more than any other area of the insurance business over the next decade. Many may see that as a provocative statement, especially with all the attention on distribution and underwriting. After all, there are so many new entrants, new InsurTech startups, and new technology solutions aimed at disrupting or transforming distribution and underwriting that it may seem difficult to justify the statement that claims will transform even more. To be sure, distribution, underwriting and other areas of insurance are undergoing transformation and may look quite different a decade from now, with significant variations by line, of course. But, keep in mind that claims is already a complex and sophisticated part of the business, with high levels of expertise, extensive partner networks, and major usage of technology. In addition, claims touch points are even more critical in today’s environment of heightened customer expectations and insurer focus on improving the customer experience.
But back to the initial provocative statement: let me provide some rationale for why I believe claims will be very, very different a decade down the road. No one can predict exactly what claims will look like in ten years, but here is a view on what is likely to change significantly—in some cases radically:
New Products: Insurers already have new on-demand, episodic, and parametric-type products in the market. The advance of technology continues to create new risks that insurers are covering (such as cyber risk). Managing claims for these products is often different. Many of the new small-premium, high-volume types of products will require fully automated claims processing, including those triggered by smart contracts.
Liability: Manufacturers of autonomous vehicles, IoT devices for property, and other connected-world devices may choose to take on the liability of their products. In this case, the claims that do occur may be handled by the manufacturer, TPA partners, or insurers that may be underwriting the risk. In addition, there are many uncertainties about which parties will be liable in complex new connected-world ecosystems.
Prevention and Mitigation: The real-time, connected world affords insurers the opportunity to be proactive in assisting customers with risk management. This means that there may be a fusion of loss control engineering and claims as the focus shifts from post-incident indemnity to prevention and mitigation.
Repair/Replace Changes: The physical objects that insurers insure are becoming more automated, and many new types of devices are appearing in homes, farms, vehicles, and factories. This will affect damage estimates and approaches to repairing and replacing lost, stolen, or damaged items.
Partnerships: Insurers are already quite experienced at partnering in the claims area. However, the supplier landscape is changing, and insurers must determine the best way to partner with new providers of connected devices, solutions, and services.
Technology: AI and machine learning for automated damage assessment and fraud detection; visualization and location intelligence for CAT planning and real-time deployment; mobile, self-service FNOL for more types of claims; and other technologies like these will make major inroads into the claims environment over time.
These areas will all warrant attention by claims executives. The drums of change are now beating—and real change will start to be felt in the next 12-18 months. When all these things are considered, I believe that major transformation is in store for claims. And for many insurers, it is going to be earthshattering.