Rethink the future of claims and seize the value creation opportunity

The state of affairs in claims today 

For all the gains in automation, claims today are still viewed as a pain point, thanks to ongoing macroeconomic uncertainty, the supply disruptions of the recent past and market volatility. Widespread inflation and a cost-of-living crisis in the UK have made cost efficiency more important than ever. In many cases, carriers have been able to offset higher costs by increasing premiums. But that’s led to increased regulatory focus on claims. For instance, the UK’s Financial Conduct Authority (FCA) is looking at claims through the lens of insurers’ obligation to provide value for money. Such considerations add complexity to the claims value chain.
 

Much of the technology deployment has involved eliminating manual activities required for data ingestion (e.g., call transcriptions, uploading photos) and basic communication and customer support (e.g., automated notifications). The technology is ready to do even more, but some organizations remain reluctant to relinquish control over critical decision points. Carriers also have understandable concerns about maintaining the highest standards for data protection, privacy regulation, and ethical AI usage. That’s why AI-enabled tools in claims are most likely to be used for data ingestion and fraud detection.
 

Carriers’ reluctance to turn claims decisioning and adjudication over to the AI bots is understandable. Client sensitivities are too great, particularly in some lines of business (e.g., life insurance). But InsurTechs and software providers are already pushing the envelope with new solutions that enable more sophisticated assessments. And AI can be used to complement other technology and generate useful insights based on the massive amounts of data carriers are collecting.
 

Consider how widespread adoption of telematics and the emphasis on driver safety have helped reduce the rate of accidents, including serious incidents, in the UK. But telematics-based solutions have not delivered all the insights or value insurers had hoped for. In the UK, many younger drivers are fully accustomed to having their driving monitored continuously, if only because that’s the only way to afford the necessary coverage. Older customers are less likely to sign up for usage-based automotive policies, even in exchange for premium discounts, because they fear insurers will use their driving and other behavioral data against them.

Most electric and connected vehicles now offer data-tracking and sharing capabilities as a standard feature, eliminating the need for an additional black box or separate device. However, insurers often can’t access the available data. What’s true of connected vehicles is also true of smart homes: insurers have made some progress in using sensor data to provide real-time information and to settle claims, but most carriers are not fully leveraging the value of all the data.

Looking beyond tech and data, some insurers have tried to get ahead of claims inflation by establishing partnerships with auto repair shops, home restoration and maintenance businesses and other third parties. This is a positive development, particularly if insurers can create seamless experiences for customers.  
 

The next horizon of claims innovation

Given the progress to date and the increased degrees of automation in claims processes, where can insurers go next? We believe the priority should be creating value in the form of increased risk prevention. Such an approach reflects the reality that claims are no longer viewed as moments of truth in customer relationships. That’s true because many claims are effectively funding transactions. Customers today are looking for services, tools and content that help them identify and mitigate risks before claims are necessary.

Deploying AI at scale offers transformative potential, and not just in claims, but rather in terms of the entire insurance value proposition. Consider how connected AI agents in underwriting and claims can work in a closed loop to design ever more precise coverages and emphasize the highest-impact preventative features and ancillary services.
 

Indeed, the deployment of AI agents in underwriting suggests what’s possible; getting from initial application to quote, a process which used to take a week or 10 days, can now be handled in just a few minutes. That level of processing power means human underwriters can apply their expertise on the most meaningful decisions. The same pattern will hold in claims, even allowing for the greater sensitivity and need to have humans in the loop more often; rather than spending most of their time collecting and organizing data, claims adjusters will invest their time on the claims where their knowledge and experience can make a difference (e.g., ensuring high-value customers are satisfied). They’ll also learn to oversee agents to continuously drive better outcomes.
 

Moving toward proactive risk prevention would represent a profound shift for many carriers. Certainly, carriers that focus on automotive coverage can learn lessons from health insurers and their emphasis on preventive care to reduce the likelihood, frequency and severity of claims. Again, the technology is ready to deliver the real-time data (e.g., weather, road conditions, vehicle status and maintenance needs). Insurers need to provide timely updates and warnings to customers.
 

Consider how ridesharing and navigation apps regularly remind drivers and passengers to buckle their seatbelts and alert them of potential hazards. Or how commercial policies for large logistics and transportation companies now feature capabilities for monitoring the temperature of shipments of frozen foods or can reroute container ships around “hot zones” with elevated risk of armed conflict or piracy. The time has come to make those features that once seemed futuristic a part of standard policies.
 

This is a model for insurers to follow as it creates new opportunities to engage with customers and thus supports more durable relationships. It also reorients the relationship around mutually beneficial outcomes – lower risk and, therefore, reduced need to file claims.
 

AI-powered tools will be very much part of the story here. When claims are filed, AI will underline automated processes for triage, segmentation and routing. Many carriers are already using AI tools in this way. Intelligent AI agents will increasingly handle decisioning, as well. The key will be designing tailored workflows that enable personalized claims experiences. AI will help scale up fast-tracked reviews and payments for low-risk customers and straightforward claims, even as it helps expert adjusters and reviewers conduct detailed reviews of more sensitive and complex claims.
 

But, again, carriers should not overlook opportunities beyond claims processing. Consider how AI agents can be deployed to proactively flag conditions and behaviors likely to produce claims and to trigger advance notifications and recommendations for preventative actions. They’ll also be programmed and managed to take direct action in certain circumstances (e.g., shutting down leaking appliances, rerouting shipments in case of emergency). Most insurers are just scratching the surface when it comes to leveraging data streams from connected sensors. AI agents will greatly increase their capacity to take advantage of this high-value data. This applies both in preventing and processing claims. By focusing on data-driven claims and utilizing claims data insights, insurers can enhance their operational efficiency and improve customer outcomes.

Special thanks to Loes Andringa, EY Netherlands Insurance Leader; Partner, Consulting, Ernst & Young Actuarissen B.V. and Paul Tomlinson, EY UK Insurance Consulting Leader; Partner, Consulting, Ernst & Young LLP, who have co-authored the article.