If insurers are to respond effectively and develop a “smart claims” function, they need to explode five widespread myths that could derail their plans.
As highlighted in Peter Manchester’s recent blog, insurers can respond by developing a “smart claims” function where processes are designed around customer needs and technology is used to optimal effect. But if insurers are to respond effectively and develop a “smart claims” function, they need to explode five widespread myths that could derail their plans.
The five myths:
1. Customers only want digital experiences
2. Implementing a modern claims platform will automatically give you a competitive advantage
3. Good service is always expensive
4. Commercial claims are always complex
5. Claims functions can be fully automated
Busting the myths
- Customers only want digital experiences
In fact, EYs research indicates that customers prefer to have non-digital contact with their insurers in some circumstances. For example, we found that 72% of customers expect to make a motor claim over the phone, compared to only 11% online. Intriguingly, however, the expectation of being able to make a claim online increases with age: 5% of customers aged 18 to 24 expect to be able to claim online, compared to 13% of those in the 55 to 64 age bracket.
This clearly indicates that a strategy based on creating digital-only experiences will not succeed: providing customer choice is vital. Only by enabling omni-channel interactions can insurers cater for different customer needs and preferences.
- Implementing a modern claims platform will automatically give you a competitive advantage
The problem with this widespread myth is that most large UK insurers have already re-platformed their core claims system – so this is simply a “ticket to play” in the market, rather than a ticket to gaining competitive advantage. What really makes the difference is how your business is organized around its technology and its use of plug ‘n’ play additions.
For example, using your core claims platform as an API-driven, services-based architecture allows for a plug ‘n’ play approach to new partnerships, new data sources and new technologies. This ability to adapt and evolve service provision quickly and effectively will enable competitive advantage. Insurers can also gain competitive advantage by using analytics to improve decision-making and identify areas where increased focus can deliver most benefits to customers and the business.
- Good service is always expensive
That may have been true once, but not any more. Historically, good service was associated with a high-cost claims function. However, new technologies and ways of working now enable insurers to provide a good quality service at lower cost.
Insurers can enable automated, proactive communications with customers using digital channels and sensors, simultaneously reducing costs while also enabling a high-quality service. Human intervention can then be introduced in the customer journey in ways that add real value, enabling greater cost efficiency for the overall claims function.
- Commercial claims are always complex
In our experience, the type or scale of a commercial customer is not necessarily a sign of claim complexity. A large commercial policy may involve some simple claims, whereas a personal lines policy could generate a hugely complex claim. Insurers that fail to realise this could find they expend unnecessary resources on simple claims and fail to give many customers the service they really need in relation to more complex claims.
Rather than responding to claims on the basis of policy type, a more appropriate response is to triage and segment claims based on exposures and reserve values. Firms can also use analytics to drive segmentation on this basis, enabling them to then route claims to the most appropriate handler or next step in the claims-handling process.
- Claims functions can be fully automated
As appealing as this idea may be, it is a pipedream. In reality, although some claims can be fully digitised and automated, it will never be possible to automate all claims. Human involvement will be needed for complex claims involving disputed liability, major injury and complex loss adjustment.
Insurers therefore need to take an intelligent approach to automation. Maximum value may not necessarily be achieved by pursuing end-to-end claims processing. It may be smarter to drive automation based on specific use cases or on particular parts of the value chain.
How to respond
These five myths are widely held across the insurance industry – and they threaten to frustrate efforts to meet increased customer expectations, capitalise on new technology and reduce operational costs. Insurers need to challenge any such assumptions to build a smart claims function.
They can do so by:
- focusing their resources on activities that really can bring tangible and sustained value
- providing omni-channel customer experiences and segmenting claims by characteristics rather than type
- making effective use of technology – through a plug ‘n’ play approach, applying intelligent automation where it counts and making sensible use of analytics