Tag Archives: claims management

Gateway to Claims Transformation

The words “platform” and “ecosystem” are trending and in danger of becoming overused and losing their true meaning, but when used in the proper context they are powerful and highly relevant. The insurance claims management process is a perfect use case for just how critical these structures can be in achieving transformation. And my latest endeavor with Claim Central Consolidated is an excellent example of a platform and ecosystem that enables carriers to make that happen.   

The property claims process has historically been stubbornly long, complex and more costly than necessary. The factors contributing to these conditions include a disjointed overall workflow, which is a result of the many manual tasks, different staff and third-party skills required and the disparate, non-integrated systems needed to fully adjudicate and resolve the claim.    

In simple terms, a platform is a group of technologies that are used as a base upon which other applications, processes or technologies are developed. The word “ecosystem” derives from the Greek words oikos meaning “home,” and systema, or “system.” In the early 1990s (go, class of 1990),  James F. Moore originated the strategic planning concept of a business ecosystem, now widely adopted in the insurtech community. 

Using biological ecology as a metaphor, Moore revealed how today’s business environment parallels the natural world and how, just like organisms in nature, companies must coexist and coevolve within their own business ecosystems. He identified radically new cooperative and competitive relationships and provided a comprehensive framework that businesses can use to enhance their own collaborations with their customers, suppliers, investors and communities. Who knew we would be applying this type of thinking to technology? 

Platforms and Ecosystems for Insurance Claims

Powerful and exciting insurance industry ecosystems have emerged – made possible by digitization – and continue to evolve like living organisms, as connected sets and cluster ecosystems within the larger and broader ecosystem of services in a single integrated experience. Platforms enable and support ecosystems in that they connect offerings from cross-industry and inter-industry players in P&C, Life, Health and Accident.

Platforms and the ecosystems they support will increasingly enable insurers to turn strategic visions into realities. Today, insurers succeed by offering products. In the future, insurers will win by providing access to risk prevention and assistance services—and by offering the right product to the right customer at the right time.

Claim Central Consolidated

Many people have asked what I’ve been working on since exiting WeGoLook.  I am thrilled to be spearheading the perfect example of the power and potential of a platform-based ecosystem within Claim Central Consolidated, a global leader in property and auto insurance claims technology, services , data and insights, and pioneers of digital claims fulfilment. Our market-leading technology solutions are completely transparent, simplifying the claims process and significantly improving policyholder service satisfaction on behalf of leading insurers across the globe. 

See also: Insurance Ecosystems: Opportunity Knocks

Developed and proven in Australia, Claim Central recently expanded to the U.S. market, initially focusing on the property claims market with the successful rollout of TradesPlus – a network of over 40 trades types which are easily accessed within our Exchange. The Claim Central platform comprises three basic components offering a number of solutions and choices within many evolving cluster ecosystems embedded in our broader platform:

  • ClaimLogik Plus end-to-end claims lifecycle management platform, built with the vision of providing a single platform that connects all parties involved in resolving a claim, available in three purpose-built versions;
    • Growth Edition – best suited to smaller businesses such as 1099’s
    • Business Edition – best suited to SME scale insurers, IA firms or TPA’s;
    • Enterprise Edition – best suited to higher volume claims handling such as larger TPAs or carriers
  • TradesPlus+ Managed Repair
    • cloud-based platform connecting insurers directly with a pre-screened, on-demand marketplace of suppliers to carry out claim-related services and property repairs.
    • Insurers have direct access to suppliers including:
      • Contractors
      • Emergency Services
      • Inspectors
      • Adjusters
      • Experts
      • Housing
    • Virtual Inspections as a Service (VIaaS)
      • connects remote desktop assessors directly with policyholders to inspect and assess their claims using our live video streaming and collaboration platform LiveLogik 
      • enables insurers to secure inspections and damage assessments without the risk, cost and time associated with deploying traditional field adjusting resources during the COVID-19 crisis.

The Power and Potential of Ecosystems

McKinsey research found that ecosystems will generate $60 trillion by 2025 which will constitute 30 percent of global sales in that year. Consequently, many insurance executives are looking beyond industry borders to understand the growing opportunities and threats that come from new partners and competitors in the ecosystems relevant to them, from mobility to healthcare and beyond.

Platform businesses are the most efficient value creators, compared to other types of businesses, because they harness the power of distributed supply and network effects. The network effect is a phenomenon whereby increased numbers of people or participants improve the value of a product or service.

Purpose-Built Insurance Ecosystems

The P&C insurance industry has already developed ecosystems to support specific business functions, and continues to do so. Some of the earlier examples date back to 1980 when information providers developed platforms linking auto insurers to collision repair facilities for the purpose of streamlining the accident repair process. These ecosystems quickly expanded to include independent appraisers and adjusters, autoglass and car rental vendors, salvage pool and towing operators, parts providers and others. Today they are beginning to include telematics service providers and auto manufacturers and dealers.

New property claims ecosystems such as Claim Central have emerged to include a full suite of segment specific cluster ecosystems including contractors, inspection technology, digital payments and other service providers which enable insurers to resolve claims in hours instead of days or weeks. According to Paul Carroll, editor-in-chief of Insurance Thought Leadership, “Innovation will focus less on bells and whistles and more on improvements across entire processes and organizations. But incumbents must start preparing.”

See also: The Word of the Year Is…’Ecosystems’

Ecosystems: Not if but When

Look no further for a brilliant and powerful new ecosystem extension than the recent announcement that Credit Karma, a unit of Intuit, has partnered with Progressive Insurance to offer usage-based auto insurance to Credit Karma’s millions of financial service smartphone app members using its integration with DMVs to obtain instant driver and vehicle information.

“It is not a matter of if, but when the insurance industry will have to adopt an ecosystem approach. The industry is not immune to the changing demands of the market” – Dr. Geoffrey Parker, Professor of Engineering at Dartmouth College and a visiting scholar and Fellow at the MIT Initiative on the Digital Economy.

I feel blessed and excited to be a tiny part of it!

Framework for Litigation Spending

The U.S. P&C industry has significantly lagged behind other U.S. and global industries in reducing unit costs over the last 15 years, and spending on managing claims litigation or contingent liabilities is a major reason. Most large P&C carriers spend 5% to 8% of gross written premium under various categories like external counsel, expert fees and internal attorney costs. This spending is considered a necessary evil so carriers can manage the right settlement or trial outcomes as well as protect their reputation. However, our experience with some of the largest U.S. P&C carriers demonstrates that there is a general lack of strategic insight in managing this large spending bucket and consequently a missed opportunity to reduce expenses.

Social inflation is an accelerating trend in the last decade, and COVID-19-related litigation is likely to complicate the situation for commercial insurers significantly. The systematic increase in litigation funding and rising wealth inequalities have added significant fuel. Many CEOs have publicly raised social inflation as a continuous challenge to profitability.

Sudden economic changes brought by the pandemic have created both risks and opportunities for P&C carriers. On the one hand, extended closure of courts and delays in litigation are likely to drive more plaintiffs to look for faster settlements. On the other hand, there is a high degree of uncertainty because of potential legislation regarding coverage exclusions in business interruption policies. Carriers need to respond to events as they occur, state by state, with great agility, empathy and data-based objectivity.

It is important for insurance carriers to have a robust litigation management strategy. We have identified five key levers in managing litigation spending:

1. Being Data-Driven

Having a data-driven claims team is the first prerequisite for leveraging the power of analytics for litigation. Exploration of claims, litigation and financial data leads to surfacing the need for advanced analytics intervention. Extraction and processing of external court data is challenging and often expensive, but a few carriers have seen tremendous return on such investment.

2. Well-Defined Metrics

Most carriers struggle with a homogenous and widely accepted (internally) definition of litigation spending and its categories. Claims, finance, general counsel, internal trial division, procurement, legal ops – are all the departments that have slightly different ideas of what actually is a dollar spent on litigation, and consequently what and how that expense can be reduced. As a start, a strategic initiative to harmonize the definition and reconcile the differences in metrics (as they flow through multiple databases and reports) should be launched. Such an initiative has very high return on investment as it tends to bring into focus the opportunity for the carrier.

3. Advanced Analytics Capabilities

A few carriers are building models to predict litigation propensity or even to predict outcome based on use of staff versus outside counsel. In addition to data science and analytics model deployment experience, prioritization of the advanced analytics resources toward litigation spending management is a key requirement.

See also: P&C Commercial Lines in 2021

4. Data Infrastructure

Quality and freshness of data flowing into the descriptive and predictive analytics workflows is a key determinant of the value of litigation analytics. Poorly built and broken data pipelines may cause delayed and incorrect execution of the analytical models and may not yield insights to act upon in spite of successful validation of early models. A robust data management strategy is important to ensure collection, cleansing and preparation of critical data elements for analytics execution.

5. Attitudes and Behavior

Perhaps the most important factor holding back P&C carriers is a lack of the right attitudes and behaviors. An economically optimal view needs to be developed for leadership to take an informed decision in every litigated claim (sue or settle) or even potential litigation. Serious adoption of insights by operational staff is usually the last and most critical point toward data-driven success. In our experience, a strategic approach to litigation management requires mixing experienced litigation adjusters skills with data science, engineering and process design experts.

Conclusion

There are no silver bullets in systematically reducing litigation spending. In our experience, the carriers using most, if not all, of the principles discussed here are way ahead. Their desire to manage litigation spending better made them methodical and data-driven. We can say with almost certainty that, as the situation with COVID-19 accelerates, changes in claims litigation combined with the effects of social inflation mean that these carriers are better prepared to face the future.

Rethinking Insurance Claim Process

It is hard to believe, even for insurance industry professionals, that first notice of loss (FNL) is the beginning of the P&C insurance claim management process.

But that is too myopic a perspective.

The beginning of the P&C insurance claim management process is the underwriting process that determines acceptance or rejection of a risk (or set of risks).

No, that still isn’t the beginning of the P&C insurance claim management process.

The beginning of the P&C insurance claim management process is the process to create products or enhance existing products.

No, that still isn’t the beginning of the P&C insurance claim management process.

The beginning of the P&C insurance claim management process is the creation of the insurance carrier’s strategy to manage the changing risk landscape.

That seems reasonable to me.

The P&C insurance claims management process is not an island onto itself. It is an integral, and critical, component of an insurance carrier’s contribution to society of managing or otherwise mitigating risk (through the use of legal contracts that stipulate the terms, conditions and restrictions defining which risks, or parts of risks, will be paid and which risks, or parts of risks, will not be paid.)

See also: P&C Commercial Lines in 2021

From an insurance business/operational systems viewpoint, there is only limited value in an insurance carrier having a claims management system that is not part and parcel of the other core administrative systems required to keep the insurance carrier operating.

I suggest that if the entire set of core administrative systems is not part of a communications and collaboration system that encompasses the entire portfolio of systems of record, systems of engagement and systems of insight, the carrier is hobbled in any attempts to compete.

This article was first published here.

Re-engineering Claims Payments

Since COVID-19 made its way into the U.S., insurers have been hyper-focused on customer retention.  

But priorities have shifted since the beginning of the year. A Celent survey released in January revealed that most companies were confidently readying for a year that would focus on innovation and be characterized by investments in digital claim offerings, client satisfaction strategies and process optimization. Fast forward to April, when a follow-up survey found that innovation took a back seat to customer retention, process optimization and cost-reduction measures as insurers responded to the 2020 pandemic dynamic.

One strategy remained high on the list: the need for digital transformation, especially in the area of claim payment.

A recent Metabank survey found that 42% of consumers would be more likely to stay with an insurance provider that pays approved claims within minutes. Findings from a VPay report revealed that the majority of policyholders — especially across younger generations — would change carriers to gain access to real-time payment. 

Consequently, groups that are still dealing primarily in paper for claim payment processing must act as their future competitiveness hinges on getting money into policyholders’ hands quicker. And those insurers that have already taken some action on the digital payment front — such as implementing automated clearinghouse (ACH) — can no longer rest on their laurels. Next-generation claim payment will be characterized by an expanded portfolio that considers a wide range of offerings, from ACH and virtual cards to push-to-debit and mobile e-payment. 

See also: Transforming the Claims Space

In the near term, insurers would be wise to consider how to make claim payment as convenient as possible through the provision of more payment options. For example, web-enabled solutions that enable the policyholder to quickly approve payments and opt for e-payments will become key differentiators. The lag time associated with ACH payments will not suffice any longer as the industry moves closer to real-time payment.

Consumers are also increasingly looking for personalized experiences. Options that allow policyholders to select their preferred form of payment, whether a digital offering or paper-based check, improve customer satisfaction across a wide array of generations.  

As insurers speed process reengineering strategies, many are finding that the business case for outsourcing digital payment is easy to make, according to the most recent Celent report. Findings suggested that many groups were considering pushing out non-strategic activities, such as payment, to third parties, as they lacked the infrastructure and expertise to implement and oversee a digital strategy that complies with regulatory requirements and protects security. 

A Growth Strategy for 2020 and Beyond

The introduction of COVID-19 has undoubtably left a lasting mark on the insurance sector, uncovering areas that left many companies exposed in terms of process optimization. These shortfalls only further underscore the need for digital adoption — especially as it pertains to claim payment. Insurers that embrace the digital age during COVID-19 recovery and beyond will be better positioned for future success and sustainability.

Transforming the Claims Space

Fundamentally, paying claims is what insurers do. For P&C insurers, for instance, claims typically amount to 60% 80% of costs.

The simplicity of this premise masks a great deal of complexity, of course, and insurers need to balance three desires that are often in opposition to each other:

  • Contain payments losses – pay what’s appropriate, and only what’s appropriate
  • Maintain customer satisfaction – customers generally don’t have much contact with their insurers except in a claims situation, which is the “moment of truth”
  • Hold down the cost of claims administration

While it’s perhaps easy enough to balance two of these, any combination often comes at the expense of the third. You can keep customers happy and administrative costs near zero by paying every claim in full; however, your loss ratio, the key performance indicator (KPI), will go through the roof. Alternatively, you can manually process each claim, establishing with absolute certainty that you are paying only those you should: Your payment losses KPI will be superb, but you’ll have high costs and unhappy customers.

Getting the balance right has been the industry’s challenge since its inception, with two out of three the best it could do – until now. Technology is remaking the claims pay-out space.

First, pay up

At Accenture, we’ve long sought to help clients industrialize the claims management process, making it operate like a factory with only as much time spent on claims as is necessary to pay what’s right. That approach means automating the claims processes, then branching out only if needed. The constant goal is to optimize the balance between time spent and the impact on the pay-out outcome.

AI and analytics have revolutionized what’s possible. In China, for instance, the scale of the market means insurers were forced to pursue a digital route. As a result, they have become global leaders in the use of data, artificial intelligence (AI) and analytics – streamlining the full range of insurance processes, from underwriting to paying claims. Today, some Chinese insurers have inverted the claims process: Their default is to pay, allowing them to balance all three aspects. Here’s how they do it: 

The key is to build a straight-through-payment process as the default, for which technology has provided progressively better solutions. However, this requires a cultural shift, with insurers changing their mindset from finding any reason not to pay, and instead paying every claim quickly except for those where there is a sound reason to delay or stop payment.

Step one is to implement more sophisticated workflow solutions so that, instead of escalating all claims above, say, $10,000, to a supervisor, the approach is to check only those claims that deviate from a predefined approach, i.e. those that raise data-analytics flags. Indeed, our studies show that “leakage” (the costs incurred administering or paying out claims) is proportionally higher with small, high-volume claims that are “uninteresting” than it is with the large ones that typically are scrutinized.

The second step is to use analytics to compare each claim’s data against its peers, looking for outliers. Why does this windscreen replacement cost three times the average? Why is this insured person making a third claim between the same two people in a year? There might be good reasons, but there might not be. This use of analytics is better than fixed rules systems, as they are too generic. (One client, for example, saw 80% of claims red-flagged, with operators consequently clicking away every flag as they hadn’t time to see whether they were valid.)

The third step is to use AI at key decision points – as Ping An does with damage recognition, where the insured sends photographs of the car after an accident, and the system estimates the likely cost. This approach is also helpful for more complex areas like hospital claims. Critical illness insurer Xiang Hu Bao, for example, has fully automated its claims adjudication system, leveraging AI and blockchain to enable digital evidence submission. 

AI and predictive analytics can be used at other decision points to enable automated standard-path payment or to stop the process. These points include coverage match, liability assessment, fraud detection and final payment decision.

See also: Property Claims: It’s Time for Innovation

Lessons for all

Insurers elsewhere can learn from the approach pioneered by Chinese insurers to increase claims accuracy, reduce leakage and boost customer satisfaction.

Data is crucial. Many insurers try to integrate multiple systems, paper reports and information held on external databases. That’s close to impossible at scale without the technological tools that pull data from different sources and place it in structured databases – for example, using AI and optical character recognition (OCR) to extract data from written documents and feed it into structured databases, or to analyze legal documents or police reports of accidents.

However, once that data is in place, insurers can apply AI and analytics to drive automation, making pay-outs the default, and ensuring that claims adjusters spend their time more valuably and have more interesting work.

Insurers can also use technology to boost the second element – customer satisfaction.