Tag Archives: claims management

Keeping Human Element in AI

Without a doubt, artificial intelligence (AI) is a valuable driver of innovation in today’s insurance industry. Unfortunately, the predominant attitude toward AI in our culture still hangs on a suspicion that people will lose their livelihoods as their jobs are taken over by autonomous machines. Many fear that we’ll lose some piece of our humanity as more and more important decisions are delegated to AI algorithms.

In fact, there is good reason to be cautious when it comes to AI, but that doesn’t mean we should shy away from using it. Indeed, we need to approach this technology with a keen attention to the importance of the human element.

Like so many other things, AI is what we make of it. It has the potential to improve our lives in meaningful ways. If we don’t act with clear and thorough deliberation, though, it also has the potential to do harm. Insurers must take care that their AI initiatives are deployed and governed in ways that support people. That means enhancing the quality of life for the employers and front-line workers whose livelihoods we safeguard. It also means empowering the claims managers and other professionals who bring that critically important human touch to our business.

AI Misconceptions

In the popular imagination, AI is imbued with almost magical powers — the ability to digest vast amounts of data, ponder the implications of that information and draw meaningful conclusions from it. Pop culture portrays AI as being fully autonomous, assuming decision-making powers and depersonalizing our lives and our relationships in the process.

Yet even tech giant Facebook is learning that a “set and forget” approach to AI generally doesn’t work well. As early as 2014, the company was using AI to categorize images, sift through content and identify material to be flagged as inappropriate. The company has been under fire from multiple directions for its sometimes overzealous policing of content as well as its apparent inability to flag truly objectionable material.

In the end, Facebook’s problem is a human one. Some critics argue that the company aims to maximize user engagement at the cost of all else and that its content must be regulated more carefully. Others argue that Facebook is too quick to block content that it doesn’t like. Both concerns speak to problems that require human solutions — not technical ones.

That leads to a fundamental question: “How can AI best serve human needs?”

AI Reality

Today, AI can very effectively support human decisions, primarily by shedding light on important matters that require attention. Most current AI applications consist of machine learning algorithms designed to perform clearly identifiable tasks based on a set of predefined business rules.

Those business rules are created and shaped by human beings. They must also be monitored and governed continuously, with a sharp eye toward the ethical implications of AI applications. Attention to the human element is essential.

The good news, though, is that human beings remain in charge. The future is in our hands. AI is a very powerful tool, with the capacity to dramatically improve people’s lives. We have the capacity to continue steering our AI initiatives in a direction that aligns with our moral and ethical priorities.

See also: How to Use AI in Claims Management

AI Supports the Human Element

Truly effective AI programs aren’t about replacing people. Like any other tool, AI can enhance the effectiveness and efficiency of the people who make our industry run smoothly.

In claims management, machine learning algorithms are most frequently deployed to aid in fraud detection, but AI is increasingly being applied in far more sophisticated ways, as well, such as matching injured workers to the medical providers most likely to help them recover quickly and completely. It’s helping claims managers to effectively handle heavy caseloads by watching for meaningful changes to each case, flagging noteworthy changes and bringing them to the attention of a human being who can assess them further and take action.

For heavily burdened claims managers, AI serves as a kind of intelligent assistant, relieving them of many of the tedious elements of monitoring cases while ensuring that nothing slips through the cracks.

Consider the case of an injured worker whose medical case has just taken a wrong turn. The details are buried in the physician’s notes, but the claims manager responsible for the case simply hasn’t had time to read the report yet. AI can spot that problem immediately and bring it to the claims manager’s attention. The vital human element is still there, but now it can be better-informed and more effective. The claims manager can act promptly, steering the case toward a better medical outcome.

AI can match injured workers up with the providers most likely to deliver positive results. That’s not simply a matter of ranking physicians based on their overall track record, though. AI can digest the details, including the type and severity of the injury, the patient’s medical history and other factors to deliver a nuanced recommendation as to which providers are most likely to help the employee recover quickly and completely.

The data fully supports this approach. When AI is applied to the task of matching insured workers with the best providers for each case, top-ranked recommendations result in under 28 days of missed work, whereas the lowest-ranked quintile shows an average of over 570 days of missed work.

Think about what that means to an injured worker and their loved ones. It’s the difference between short-term injury and chronic pain. For many, it’s the difference between dignity and depression.

This, in the end, is what AI is capable of. It’s true that we should proceed with caution. Like any other technology, AI has the capacity to deliver tremendous benefits, but it also has the potential to be misused. We all have a responsibility to see that AI is done well, that it has a humanizing influence, not a dehumanizing one. In the process, we can improve the lives of insured employees, claims managers and other stakeholders.

As first published in Claims Journal.

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.