Shifting focus: from volume to complex claims
Over the past two decades, digitalization has transformed the insurance industry. Starting with basic software and data tools, insurers have steadily advanced in automating the claims process. Most insurers in the Nordic region have automated their "volume claims" — routine claims such as theft, minor property damage or travel losses. This has made the process faster and more efficient, benefiting both insurers and policyholders. However, this achievement raises a new question: what’s next?
The next step involves addressing "complex claims" — large, intricate cases involving significant losses from events like fires, floods and storms. These claims are challenging and often require collaboration among multiple parties. Automating them offers substantial benefits in terms of time, cost and efficiency, but it also presents significant challenges. This article explores the new phase of automation, the challenges it brings and the path forward for insurers.
Market trends and key drivers for digital transformation and automation
Digital transformation remains a top priority, with increased automation in claims handling. Key market trends include the use of artificial intelligence (AI) and machine learning (ML) to bridge the insurance protection gap and improve customer experience. The protection gap — the difference between ideal and actual insurance coverage — highlights vulnerabilities due to economic shifts and emerging risks like climate change and cyber threats.
AI and technology have revolutionized the insurance industry by enhancing predictive modeling, automating complex tasks and improving customer interactions. Technologies like Internet of Things, augmented reality, virtual reality, machine learning, robotics and blockchain promise further advancements. However, many insurers still rely on manual processes, making it difficult to meet customer expectations and control rising costs.
The main drivers pushing insurers toward a digital future include changing customer demands for personalized interactions, increased competition from tech-focused newcomers, and the pursuit of cost efficiency through automation. The growing maturity of third-party solutions, such as AI-driven claims processing platforms and automated customer service tools, enables insurers to integrate proven technologies into their workflows, accelerating digital transformation and improving operational efficiency.
Challenges on the road to complex claims automation
Industry leaders have swiftly adapted to new drivers, leveraging partnerships and technology to meet evolving customer demands, leading to cost efficiencies and improved satisfaction. The adoption of these technologies underscores the maturity of the volume claims segment, with all necessary components for advanced straight-through processing (STP) now available.
However, achieving success is challenging. Insurers face inherent business challenges and must develop creative solutions through iterative processes and data analytics. Despite advancements, full digital transformation remains challenging due to the following barriers:
- High cost of technology infrastructure
- Complex security and privacy requirements
- Difficulty integrating multiple systems
- Difficulty upgrading from legacy infrastructure
- Complexity managing digital ecosystems
- Talent shortage for technology implementation
- Uncertainty regarding technology investments
- Stranded, complex data
- Poor performance of third-party tech providers
- Data or technology barriers
Automation of complex claims holds the promise of greater efficiency, increased accuracy and reduced processing times. However, achieving successful automation requires high data quality and technical competencies. By addressing these prerequisites, organizations can unlock the full potential of automation, leading to enhanced operational efficiency and superior customer experiences.
Insurers often rely on legacy systems that hinder modern digital processes, creating technological debt. Overhauling these systems is costly and complex, requiring careful management to avoid operational disruptions. Balancing automation and human expertise is crucial, especially in complex claims handling, where the human touch remains essential.
Fraud detection is another critical area. It requires a balance between automation and manual review to prevent financial losses. Insurers must calibrate their STP systems to flag potential fraud while maintaining efficiency. Setting fraud detection parameters too conservatively can lead to false positives, while leniency can allow fraudulent claims to slip through.
Managing change with external partners is equally important. Insurers should leverage their buying power to drive necessary adaptations in the market, fostering trust and alignment among all parties. By applying lessons from internal change management and stakeholder engagement to third-party relationships, insurers can create a collaborative environment that supports the long-term success of the transformation.
Opportunities ahead: how insurers can accelerate complex claims automation
Despite these challenges, automating complex claims holds exciting potential for the insurance industry. Following the implementation of volume claims automation, insurers are now positioned to accelerate automation in complex cases, achieving meaningful progress. Insurers who use digital tools to collect and structure data could significantly speed up the process and enhance accuracy. Platforms that enable real-time collaboration among claims handlers, third-party providers and policyholders could also streamline communication and reduce duplicate work. It will enhance transparency, reduce miscommunication and accelerate resolution. Over time, data from complex claims could fuel predictive models, helping insurers identify patterns, forecast costs and ultimately streamline the process. While full STP for complex claims may be limited, partial automation using historical and structured data will streamline many aspects of complex claims.
