How will technology revolutionise claims management by 2020?
An article by Duncan Cornwell – Director at ediTRACK-i
The insurance claims process in the London market has seen relatively little change since the 17th Century with Edward Lloyd’s original coffee house. There is still a marked tradition afforded to the claims file upon which comments are still made, and for the most part the majority of payments of claims move through central settlements. The electronic claims file has opened the path to electronic communication, but it has always been a hostage of tradition, current practice, embedded process management and backward compatibility of IT infrastructure.
The market place is constantly striving to evolve the process and in recent years there have been a lot of initiatives that will have contributed towards modernisation, through market reform groups and the increasing needs of an ever changing regulatory framework.
So let’s turn the clock forward…
It’s 2020: what are biggest drivers behind change?
How will these drivers have influenced the process?
And what part does technology have to play?
The biggest change agent will not have come from the market reform groups, regulatory or legal change, but from innovative insurers wanting to create an edge against their competitors. As technology becomes highly scalable it enables ever more inventive ways in which to use it. The early adopters will have paid a significant price for the technology that has allowed them to improve customer satisfaction, and outperform competitors on lapse ratios as the service – not the price – becomes the differentiator.
The manner in which software is developed will have changed, as the software houses develop platforms as a service, and niche expertise will be freely given by a competitor to meet the needs of a shared client. Intellectual property will also be less of a hurdle as software becomes a more fluid market place.
The aggregator sites will have little influence, as customers feel the pricing is bloated from these sites, and the wider insurance buying public now prefer to deal directly with the best provider. Where software allows you to track a driver and reward behaviours, the modification of behaviours makes the price less important to the consumer so that claims services have far more importance. The best provider will enjoy a higher premium, but the customers are assured that they will have a smoother delivery should the need ever arise to make a claim.
There will be an ISO balanced score card for each insurer that is held by a truly independent party, possibly a ratings agency or a regulator, which would be reported upon quarterly. This will give a rounded view of the overall claims performance, and different lines of business can view the weighted score. The transparency that this creates will ensure that treating customers fairly is fully embedded in all transactions.
Software as a service (SaaS) will become the norm
Technology will have jumped in great leaps and bounds; software as a service will become the normal way in which to conduct business. The lower cost of this allows the market place to grow with a number of new start ups that no longer need to invest heavily in technology to trade, and the increase in competition drives innovation in every insurer.
The market place for software will be highly competitive as migrating from one system to another no longer holds fear for the insurer, as web services and web standards, together with the insurance standards of Acord & Polaris, allow a change in software to happen in weeks rather than months. Customers will consider security and service as having equal importance to price, as cloud technology has rendered the back office data repositories and data warehouses obsolete, as platform as a service carries data to the gold standards of the solvency 2.
The run-off and discontinued market place will become highly competitive in 2020, as insurance companies have the ability to easily integrate disparate systems, allowing the commutation market to be extremely active and the larger players to aggregate and segregate as they wish.
All of the market place is using the cloud in 2020 as they now have their enterprise fully connected. Customer, broker, loss adjuster, third party administrator and insurer are all unified through cloud services. Overall both collaboration and control are all improved.
All in all, by 2020 the impact of a good claims service that is tuned to top down claims leakage has less uncertainty, and the best now have less capital requirement to carry out the same business.
So how is this likely to influence the different individual classes of business?
Let us take a look at motor insurance in 2020. After two decades of running at a loss, motor will be the class that people are now interested in, both as a method of discounting capital by diversity and as a way of creating profit.
When a simple accident occurs, the smart phone will now be able to measure the time, date, latitude and longitude of the accident. The smart phone will become the ‘black box’ in the vehicle.
The force of the impact will trigger the app to awaken, and if the user chooses to proceed with the claim then a variety of actions can happen automatically. There will be a single provider for the application, and all of the development of this technology will have been through a working group and rendered into standards.
First of all the app will send an XML message to the insurer, the latitude and longitude identifying the nearest approved tow firm, who will also receive the message. Being in a zone with no cellular connection will no longer be an issue as the phone will have satellite connection for essential events. There will be options present on the phone, for example, is there bodily injury? If there is then there will be a message relayed for police attendance.
Committing Fraud will be made increasingly difficult
Fraud will be dramatically reduced or circumvented as the precise location of the accident will be instantly known and photographs will be taken, stored in a secure tamper proof cache held locally on the device. The photos will be uploaded automatically to the insurer when the device is back within a Wi-Fi zone. Details of insurers are now exchanged by bumping phones and again the XML messaging to insurers happens simultaneously.
Being on an Android or a different platform will not matter as the data flows will not be impaired. The weather conditions information will again be app-driven and data messaged. There will be a neat identification of when the same insurance group is involved and this will follow a different business process and any potential conflicts of interest will be electronically managed. If legal expense coverage is provided, again a notification will be sent.
The vehicle will be towed to the nearest approved repairer, which again will be controlled by the automated messaging back to the tow firm. The repair estimate will go straight into the repairer’s system and the data will be automatically messaged to the insurer. The communications to the insured will either sent through text messaging or live messaging or their other preferred medium, even messaging through Facebook, advising when the vehicle will be ready for collection.
Credit hire suppliers will be on the decline
Credit hire will be a portal that will be managed directly against insurer data. The credit hire suppliers will be fewer, with lower margins, meaning that this type of claim can no longer deliver unpleasant surprises. The big data, which a simple motor claim can generate as connected information, will be used to make processing simpler. There will be payments made on a direct basis with daily peer-to-peer settlements, allowing discount as the time value of money is recognised. An insurer paying their accidental damage quickly to the repairer will create mutual trust and a better relationship with the repairer. The other benefactor will be the customer, who has less time without their vehicle, and for commercial fleets the lower pool resource will generate further savings.
Property losses will have changed beyond all recognition, as a connected enterprise will mean that the loss adjuster will instantly be aware of who are the instructing principal(s). Large single risks will connect directly to the insurer’s nominated loss adjusters’ panel. A catastrophic event will trigger catastrophe plans that can be monitored in real-time. Big data will allow fee schedules for this type of work to be recognised and applied within 24 hours of the event happening. This will allow an overlay of an insurer’s portfolio of risk level data in combination with live satellite data of the damage to create modelled loss.
Properties could have catastrophe ratings!
Satellite data will be openly available. It will be possible to view the area and apply a quake as a layer on a 3D map, with the ability to show individual risks at risk level data. The higher data storage realisation of the cloud will have a structural score that is applied to each building. Just as today we have homes with energy ratings, the future will have catastrophe ratings and this will be ISO coded for catastrophe perils. The insurer will then apply the layer and the damageability factor will be applied to give a true portfolio view of range. There will still be unique features of natural perils, but the estimates of material damage will be closer if an insurer is using scale rates and an algorithm to calculate the costs.
The visibility of chosen loss adjusters in these scenarios will open the possibility of viewing those under or over utilised. The insurer data will be automatically anonymised and published by the adjusting firm, showing the number of open closed and repudiated losses.
The frequently exploited loophole that existed in 2013 (for claims in catastrophes below a certain level to be repaired) will have closed. The builders will also be on the connected network of first, second and third tier suppliers, so it will be possible for the insurer or loss adjuster to look at average costs and repair cycle times.
These suppliers will have given up something by operating in this way. However, a customer satisfaction survey will check the repair to the agreed timelines, and a small uplift will be available to these suppliers for timely repair or reinstatement.
Quicker and much more efficient repair or reinstatement will allow an insurer less vulnerability. Suppliers are getting to understand where the work is actually coming from, and the payments will also be quicker as they are paid peer to peer.
Professional indemnity losses will now be all portals-driven with all circumstances scanned and messaged to the portal. The portal will have significantly reduced costs, making managing claims far more efficient, and stricter adherence to directions and court orders will result in better case management.
At this point you are probably questioning where the broker will figure in all of these predicted changes. In 2020 the client will be able to message new losses no matter where they are in the world, so the broker will need fewer back office and claims broking staff as he merely needs to direct the odd message. Costs will be significantly reduced.
The best brokers will still able to collaborate with the client or the insurer on the portal. Their value will remain that they are able to see a problem before it actually happens, and their intervention will enable the communication and expectations to be tempered accordingly. In most cases meetings remain virtual and rarely face to face.
Greater transparency will lead to faster settlements
Peer-to-peer trading and the removal of central settlements will enable faster payments with greater accuracy, liberating the back office. The broker will spend less time reconciling and repaying monies to clients, so they will no longer need to hold client money or be authorised to do so. The regulatory relief that this should have afforded will not have happened.
Dispute resolution will have continued to grow as a business, and with a transparency of legal costs, this is a model that will predict win/lose cost modelling accurately. There will still be times when litigation is the only alternative, but it will reduce year on year.
I conclude by stating that in 2020 the technology will be key in achieving most of the things discussed. The major change will be the affordability of managing data and the continuance of this trend for the future, making innovation more achievable than ever.