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Not long ago, determining and managing insurance coverage entailed a lengthy, methodical, paper-heavy process. Now, thanks to digital transformation across industries, customers expect instantaneous responses from insurers, whether they’re applying for a new policy or filing a claim. However, because the insurance market faces particularly stringent regulations, digitization is not nearly as straightforward as it is for many other industries. Increasing emphasis on digital transformation is helping some insurers introduce efficiency, better customer service and general modernization to an industry that has long been weighed down by legacy technology and operations. This innovation is especially urgent for today’s large incumbent insurers who are facing a greater threat from nimble challengers big and small.
Take claims process transformation, for example. Customers increasingly expect claims to be handled with the same sort of self-service and multi-channel responsiveness they’ve become accustomed to in other industries (such as online shopping with Amazon, or transportation with Uber). The claims process is, after all, the most important customer touch point in the insurance journey. It’s the crux of the entire process. Get it right through fast, accurate appraisal and prompt reimbursement and you secure the customer relationship. Get it wrong and you’ve lost that customer (and anyone they talk with).
By transforming and accelerating the claims process, not only can insurers delight customers, they also gain efficiency, reduce costs and address other challenges such as claims fraud. Clearly, it’s a process worth optimizing.
New Tech Shaping the Future of Claims
In fact, there’s a wealth of new technology that promises to transform the claims process. In auto insurance, “black box” telemetric devices are becoming more prevalent in new cars, promising greater insight when it comes to determining the nature of a claim. And it won’t be long before fully connected and autonomous vehicles become commonplace on our roadways, delivering instant FNOL and a wealth of telemetry data.
For structures, sensor technology will allow for more effective monitoring of incidents such as fire and flooding. IoT sensors can also provide broader advanced warning of weather-related natural disasters, such as high winds or flooding, which will help to protect property and reduce risk.
These and other cutting-edge technology innovations will deliver numerous benefits for insurers, such as enhanced and more specific segmentation, streamlined workflows, more efficient core processes, improved productivity and more.
The Challenge of Legacy Systems
However, a key blocker to this sort of transformation—and a reason that the claims process isn’t as efficient as it should be—is the antiquated technologies used by incumbent insurers. These systems have been built up over years (or even decades) and have become siloed, leading to disconnected processes. Innovative digital technologies that offer speed and ease of use, both in the back office and with customer-facing systems, unfortunately don’t integrate well with legacy infrastructure and applications, leading to disjointed islands of innovation. That makes deploying these emerging technologies harder than it should be.
Short of ripping and replacing legacy systems—or doing expensive and time-consuming custom integrations—the likely best option is to focus on process automation, which can manage and translate the flow of information between newer and older applications. This effectively provides a “digital wrapper” for legacy infrastructure, allowing insurers to take advantage of all the advances mentioned above, and many more.
Connect Systems, Data and People
Digital process automation is actually central to this sort of transformation, in that it orchestrates the people, applications and information across insurance organizations. Insurance is an industry that’s built on information and data. But when that data is generated and stored in disconnected systems, it can be difficult if not impossible to process a claim in a timely manner. Moreover, because manual, people-driven intervention often become the bridge between disconnected systems, error can easily creep into any process. Using automation to connect systems streamlines those workflows, improving efficiency, productivity and customer satisfaction.
While larger ticket insurance claims will always require some form of human intervention, the process can still be made easier with the help of automation to connect information. Regardless of the extent to which employees are part of the process, insurers must avoid creating a complex spaghetti structure between systems, processes, data and people by instead instilling a centralized hub-and-spoke repository, then using automation (the spokes) to move data in and out to various systems as needed.
Address Claims Fraud with New Technologies
One added benefit of this digital transformation and automation is the opportunity for fraud mitigation or prevention. According to the Federal Bureau of Investigation, the total cost of (non-health) insurance fraud is more than $40 billion per year, costing U.S. families between $400 and $700 in increased premiums annually. A transparent, but secure view of data across systems—combined with indicators pulled in from external sources, such as IoT devices, or services, such as identity verification—can help insurers detect, investigate and prevent fraud.
The siloed storage of information has made it hard to connect the dots and detect fraudulent patterns of behavior. For example, the inability of what controls are in place to “talk to one another” across different parts of the organization presents a top barrier to improving fraud prevention. A top transformation goal for insurers should be development of an infrastructure that offers a secure, holistic view across all their information to detect patterns that may indicate fraudulent behavior.
Automation technologies in particular can help with case management and claims history, allowing insurers to look for patterns of insurance fraud (e.g. false claims, organized crime, overvaluations), providing opportunity to reduce, avoid or mitigate the risk.
Incidents of identity fraud and intellectual property theft are of particular concern. Information theft, loss or attack is rapidly becoming one of the most prevalent types of fraud experienced. Data breaches by hackers, such as the one experienced at Equifax, which result in unauthorized access to as many as 145 million consumers’ full names, addresses, dates of birth, social security numbers and driver’s license numbers, has made policyholders aware of data vulnerability.
It’s not hard to imagine how cyber-criminals could weaponize AI along with machine learning to lead phishing attacks and spread malware at an alarming rate. The signs are often there, you just need to technology to identify them, such as real-time monitoring and other anti-fraud measures.
Digital processes can help to diminish these instances by keeping criminals out and preventing any internal human error or intentional misconduct. Automation can help to enforce a central audit system to record data and actions and help you to prove compliance across your channels. If insurers want to ensure that their brand remains intact, they need to identify risks with fraud monitoring tools and put real-time integration in place.
Every transformation is hard to manage, and even harder to begin. For insurance companies wrestling with multiple stakeholders and legacy systems, that transformation can be all the more daunting. But insurers would be wise to embrace a connected view of systems, deploying automation to enable efficient, user friendly processes to improve customer service, competitive advantage, risk mitigation –and ultimately, the bottom line.