Tag Archives: claims management

Claims and Effective Risk Management

The cost of claims has been at the heart of Total Cost of Risk (TCOR) since even before the inception of risk management as a separate function. The sheer magnitude of losses, insurable or not, defines so much of what risk managers focus on and tends to be what they report on most often, as well. The nature of mature and, by inference, effective risk management programs has claim management as a key focus. While risk maturity is directly correlated with risk effectiveness, this latter term encompasses a much broader perspective on things that matter. 

Not surprisingly, many components of risk management maturity have some connection to effective claim management. Accordingly, it is appropriate to understand what these components are and how they dovetail with a more comprehensive view into effective risk management. Admittedly, this perspective relates most to the traditional practice of risk management, focused on hazard risk, but failure in this realm will likely point to failure in other areas of risk management.

Components of Risk Discipline 

To instill risk discipline, and, by extension, maturity into claim management, one must set the tone for effectiveness across the spectrum of risk management activities and significantly feed overall risk management performance. This tone will influence the ability of risk leaders to act as “trusted advisers” to organizational decision makers. This should be a key goal for risk leaders, critical to long-term effectiveness and functional sustainability.

The starting point for this subject is two key things. First, how one defines “risk” and drives a consensus among key stakeholders about that definition. Claims are, of course, the outgrowth of risk and exposure. This direct relationship is the essence of why claims and effective claims management have a direct relationship to effective risk management. Whether this aspect of the discipline gets done by insurers (as part of the insurance contract), insureds (as a part of a self-administered claim operation) or through third parties (independent adjusters, third party administrators etc.) makes little difference. Effective claim management feeds effective risk management.

The second issue is both which risks are your focus and where on the loss curve they fall. This may sound simple, but the reality is that many risk leaders have responsibilities for only a portion of the risks that organizations face; often only the insurable risks. If that’s the case, the need to focus on claim management is clear; one leads to the other.

The Basics of Effective Risk Management Maturity

If you are a risk leader with broad accountability for risks, then the first question of “what is a risk to your firm?” requires total clarity. For the purposes of this article, a good definition of risk is “uncertainty” as it relates to the accomplishment of objectives. This simple definition captures the most central element of concern — uncertainty. However, the real challenge is determining the amount of uncertainty (such as frequency/likelihood), as well as the level of impact or severity. Each risk leader must make this choice and get it validated by his or her organization.

While many leaders focused on hazard risk look at risks at actuarially “expected” levels of loss, the challenge is how far out on the tail one should manage. While the possibility of loss becomes increasingly remote as you move out toward the tail of the curve, the impact of events becomes more destructive. Because the magnitude of loss in this realm can be catastrophic, the importance of both preventing and mitigating these events and their impact becomes critical. Central to after-loss mitigation is the claim management process. Related key questions that every risk leader must answer include:

  • What matters more to your organization: likelihood or impact, or are they equal?
  • What level of investigation should you apply to less likely risks?
  • How do we apply typically limited resources to remotely likely risks?
  • Do you have a consensus among key stakeholders as to what risks to focus on and how?
  • Do you have or need an emerging risk identification process?
  • Do you have a consensus on and clear understanding of how you define risk in your organization?
  • Have you educated your organization on the correlations between losses, claims and risk effectiveness?

These questions are the starting point for ensuring risk management maturity. From your answers to these questions, you can chart your course for what this will mean to your firm. The answers will define the process elements of maturity that will be needed to achieve your desired state. But we need to define what risk maturity is to track progress toward this state and to ensure that stakeholders are aligned around the chosen components necessary to get there. Understanding the attributes of claims and risk maturity includes:

  • Managing exposures to specifically defined appetite and tolerances;
  • Management support for the defined risk culture that ties directly to the organizational culture;
  • Ensuring disciplined risk and claim processes aligned with other functional areas;
  • Creating a process for uncovering the unknown or poorly understood (aka emerging) risks;
  • Effective analysis and measurement of risk and claims both quantitatively and qualitatively; and,
  • A collaborative focus on a resilient and sustainable enterprise, which must include a robust risk and claim strategy.

See also: Future Is Already Here in Claims

Examples of Risk Management Maturity Models

One thoroughly developed risk management maturity model (RMM) comes from the Risk Management Society (RIMS). While it was developed some 10 years ago, it remains a simple, yet comprehensive view of the seven most important factors that inform risk maturity. When well implemented, these components should drive an effective approach to managing all risk within your purview. 

The components of the RIMS RMM model include:

  • Adopting an enterprise-wide approach that is supported by executive management and that is aligned well with other relevant functions;
  • The degree to which repeatable and scalable process is integrated in the business and culture;
  • The degree of accountability for managing risk to a detailed appetite and tolerance strategy;
  • The degree of discipline applied to using the elements of good root cause analysis;
  • The degree to which a robust emerging risk process is used to uncover uncertainties to goal achievement;
  • The degree to which the vision and strategy are executed considering risk and risk management; and,
  • The degree to which resiliency and sustainability are integrated between operational planning and risk process.

Like all risk management strategies, no two are exactly the same, and there is no one way to accomplish maturity. Importantly, every risk leader needs to do for his or her organization what the organization needs and will support. 

Of course, RIMS is not the only source of risk maturity measurement. Others, including Aon, offer other criteria. Aon’s model includes these components:

  • Ensuring the board understands and is committed to the risk strategy;
  • Effective risk communications;
  • Emphasis on the ties among culture, engagement and accountability;
  • Stakeholder participation in risk management activities;
  • The use of risk in/formation for decision making; and,
  • Demonstration of value.

This is not to say that the RIMS model ignores these issues, they simply take a different emphasis between the models. 

Another model worth considering is from Protiviti’s perspective on risk maturity as it relates to the board of director’s accountability for risk oversight. A few highlights of the perspective include:

  • An emphasis on the risks that matter most;
  • Alignment between policies and processes;
  • Effective education and use of people and their place in the organization;
  • Ensuring assumptions are supportable and understood;
  • The board’s knowledge of asking the right questions; and,
  • Understanding the relationship to capability maturity frameworks.

Certainly, good governance is critical to ultimate success, and the board’s role in that is the apex of that consideration. If the board is engaged and accountable for ensuring their risk oversight responsibility is effectively executed, the successful execution of the strategy is likely and, by inference, risk and related claims will have been effectively managed, as well.

Another critical aspect of the impact of risk and claims that should not be overlooked is their impact on productivity. If productivity is directly related to people’s availability to work, then we can quickly agree that risks produce losses that affect both people and property, oftentimes together. We can readily agree that impacts to productivity are a frequent result of losses and the claims they generate. Further, productivity impacts are not just limited to on-the-job injury. Every car accident, property loss or general liability loss that includes personal injury has implications for productivity, in either the workplace or outside of the workplace. As a result, it behooves all risk and claim leaders to execute their roles by aligning their interests and driving their focus.

Finally, a few fundamentals that are important to understand in execution of these goals include understanding that:

  • how you handle claims will directly affect not just your TCOR but your overall risk management capability and effectiveness; 
  • there is no one right approach to managing claims or risks; each organization must chart its own course aligned with its culture and priorities;
  • risk and the claims they can generate must be treated as an integral aspect of organizational strategy;
  • risk and claim management should be a focus on additive value; and,
  • risk and claim maturity have shown that better results are achieved as a result.

See also: How Risk Managers Must Adapt to COVID

In its simplest form, risk management is about preventing (or, on the upside, leveraging), financing and controlling risk and loss. Effective risk management is dependent on many elements, not least of which is effective claims management. And while claims are naturally focused on negative events that have already occurred, this activity is centrally critical to comprehensive, effective risk management.

How you prioritize claims and related activities will have significant effects on how you can contribute to organizational success. Doing both well will enable both risk and claim management effectiveness, demonstrated by measurable maturity.

How to Use AI in Claims Management

How do you increase quality in claims assessment, management and administration? We share insights into an end-to-end, AI-powered, claims-automation approach to increase quality, improve processing efficiency and reduce cost.

In this blog series, I’ve spoken about how AI increases process efficiency, reduces costs and helps business solve problems. I also showed how it enables smart business transformation by creating intelligent processes at every step along the value chain and intelligent products and services in the market.

In my previous post, I illustrated how insurers can use AI-related technologies in underwriting and service management. Now, I’ll explain how AI helps insurers to manage claims more effectively and efficiently.

How can insurers use AI in claims management?

AI technologies make information systems more adaptive to humans and improve the interaction between humans and computer systems. By doing this, AI gives insurers an edge on how they manage claims—faster, better and with fewer errors. Insurers can achieve better claims management by using the intelligent technologies in some of the following ways:

  • To enable a real-time question-and-answer service for first notice of loss;
  • To pre-assess claims and to automate damage evaluation;
  • To enable automated claims fraud detection using enriched data analytics;
  • To predict claim volume patterns;
  • To augment loss analysis

What are the benefits of using AI for claims management?

In our  2017 Technology Vision for Insurance , we highlighted how Fukoku Mutual Life Insurance in Japan is using the IBM Watson Explorer AI platform to classify diseases, injuries and surgical procedures as well as to calculate claims payouts.

See also: Insurers: Start Boosting Your ‘AIQ’  

Our research has shown automated machine classification can be 30% more accurate than manual classification by humans and has the potential to increase productivity by 80%. AI-related technologies can enable higher quality in claims assessment, management and administration. It also supports improving the predictability of reserves and fraud.

Smart machines can pre-assess claims and automate damage evaluation. Machine learning enables insurers to classify claims via email in the case of an accident or if medical care is required. It’s fast, accurate, efficient and simple to use.

Case Study 1: Cognitive health insurance claims process management

We have conducted a pilot with one of our insurance clients on the application of AI to its health insurance claims processes. This insurer’s health claims management process took about 11.5 minutes from receipt of the claim to updating it and closing the record. Scanning the paper documents and uploading them into the portal where they were categorized were the first manual steps. It took roughly five minutes to analyze the data, another five to verify rejection rules and one and a half minutes to accept or reject the claim.

With our machine learning solution in place, a fully automated process was enabled and took only three minutes to do the same amount of work. This represents a 74% reduction in the claims settlement time.

Furthermore, the machine learning technology applied was able to process health claims with 80% accuracy. The other 20% are incorrectly processed owing to spelling errors or database limitations. However, machine learning technologies are able to store and recall those errors for more accurate claims processing in the future.

Case study 2: AI-powered automation of automobile claims processing

Accenture was recently part of a major client initiative to identify technologies and partner for an AI-driven automation journey. We proposed and built a solution to automate processes to extract and classify data from commercial automobile claims PDF documents.

The client faced many challenges, including having fewer than 400 records to classify 55 unique cases, and these records were mismatched and labeled inconsistently. The client also received scanned images containing text, owing to the redaction process followed to ensure data privacy.

We developed an on-premise solution using a combination of IBM offerings and open-source technologies that enabled a detailed analysis of training data. The solution also helped the client to identify quality and sparse/skew data and to test various approaches to maximize performance.

In the end, a blind data set of 207 claims documents was processed within a four-hour assessment window, and we were able to process claims PDF documents with scanned images as well as text, including several formats and layouts not part of training data.

See also: How to Use AI, Starting With Distribution  

We identified several pain points in the current claims management process:

  • Error-prone manual data extraction;
  • Inconsistent claim classification;
  • The need for additional downstream validation;
  • Increased time and cost for processing and resolution.

Solution proposed:

In the next post, I’ll look at how AI-related technology can be used to improve customer services and policy administration. Get in touch to find out how you can use AI in the entire insurance value chain, or download the How to boost your AIQ report.

3 Techs to Personalize Claims Processing

Claims is a people business – virtually every claims executive I have ever met believes this. If you have ever been in a vehicle accident, experienced damage to your home or business, or been injured in a work-related incident, one of the first things that comes to mind is: I need to talk to someone who can assure me that I have insurance coverage and that there will be resources, both financial and technical, to make me whole again. This reaction is a human one and is not likely to go away. Many claims organizations have tried to maintain staffing levels to ensure a human connection is available to all. However, this is expensive, and claims organizations are already experiencing a shortage of individuals to fill critical claims roles.

Claims executives are at a crossroads, and many questions arise. How do we maintain 1:1 people interactions and simultaneously manage skills gaps and expenses? Then there are digital expectations from all parties to the claim – insureds, claimants, distributors, service providers – how are those expectations met? Given all these weighty challenges, many claims decision-makers relate to the phrase: “There’s a light at the end of the tunnel, and it’s a train coming the other way.” But, for many claims organizations, the reality is that the digital train that is coming can provide answers to the people challenges they face.

See also: How Work Culture Affects Claims Process  

SMA’s recent research report, Claims Transformation: New Paths Forward for Reporting,  Verification and Communications, explores emerging technologies and trends in claims operations. Relative to the people business theme, there are several areas of innovation where concerns, expectations and answers merge.

  • Self-reporting via photo and video. Apps that facilitate the insured or claimant in providing visual representation of damage will speed the claim along versus waiting for an adjustor or inspector to do the same thing. Faster settlement clearly meets consumer expectations. Additionally, precious claims resources are preserved for more complex claims.
  • Self-reported photos and videos along with AI analysis. The resulting outcomes from AI analysis can facilitate the next-generation of straight through processing (STP), ultimately going well past the current glass and towing claims STP, as things such as machine learning evolve over time. Again, shorter time to settlement with little or no claims adjustor involvement – a win-win.
  • Telemedicine and digital health platforms blend consumer-accessed, personalized information with a collaborative environment for adjustors, service providers, medical professionals and other concerned parties. These technologies blend useful, self-service information with human access at the moment of need.

These are just a few examples of the technologies that claims organizations have at their disposal to transform processes and operations. The previously mentioned SMA research report covers many other areas.

Make no mistake, balancing when to insert adjustors into processes and when technology can facilitate desired outcomes is not easy to accomplish. One of the key success factors is to look at claims processes from the outside in. This is not intuitive for claims organizations that have spent entire careers managing the challenges and intricacies of the adjustment process with an internal lens to meet corporate compliance goals and tangential department needs within a regulatory framework that can be daunting.  However, looking at claims processes from the consumer perspective – outside in – can suggest ways of execution that fulfill the need for the customer to be compensated for their loss in the fastest way possible or to find the clearest path to wellness. Happily, these outcomes also preserve human claims resources for when an individual really needs it.

See also: The Best Workers’ Comp Claims Teams  

The technology vs. human paradigm will continue to change, probably forever. However, claims is one of the areas within insurance where expert adjustor skills can truly make a meaningful difference for individual outcomes. But the definitions will continue to change, and the challenge for claims executives will be to continually assess processes through a different lens. Optimistically, the light in the tunnel will be a source of inspiration.

How Work Culture Affects Claims Process

Workplace culture has been a hot business topic for some time, and interest shows no signs of abating. We’ve all heard about some of the “coolest” companies that tout their culture as a true differentiator. For example, tech giants Google and Facebook have been longstanding advocates for a strong company culture and as a result are leading examples of enviable places to work. Others such as billionaire investor Ray Dalio’s firm Bridgewater have embraced a very different version of culture – in his case one focused on “radical transparency” – and have seen similar success. No matter the approach, what these and other forward-thinking companies share is a passion and commitment to a strong workplace culture and its impact on their overall success.

Culture has been at the forefront for me since the early days of forming my claims management consulting firm. Over the past 16 years it’s been a top priority as we’ve grown our workforce, and aimed to attract and retain the best talent in the business. As a small business, we see the impact of a strong culture even more. What we’ve honed has helped us not just in forming our identity but also with creating a set of values that drive how we interact with our customers.

However, in working with many claim operations over the years, we’ve seen how many are still late to the party when it comes to prioritizing workplace culture. While some are scratching at the surface with remote work opportunities and agile work environments, few have fully embraced culture as an unquestionable tenet. Even beyond the impact it has on talent acquisition and retention, we think it can also serve as a driver for better risk management and customer service results.

Workplace Culture – Do We Know It When We See It?

As much as we may think we know about workplace culture, maybe we should step back and try to define it. If you Google this term as I did, you might get 10,000 or more results. While there’s no shortage of research on the topic, there are some common themes that are key to building a solid foundation.

Shared Purpose

Employees like to know that they are doing meaningful work and feel connected to their employer’s reason for being in business. Sharing a common set of values with their employer and understanding how their unique skills fit into the bigger picture are important to employees seeking meaning from their work. Identifying with a greater purpose is often tied closely to feeling successful, which is also highly motivational.

Employee Recognition

Employees often fail to meet their full potential if their contributions are not regularly appreciated. Employers who take the time to acknowledge good work see increased loyalty among their employees and even improved job performance. In fact, it’s so important that according to social scientist Dan Ariely, whose research covers the drivers of motivation, “When we are acknowledged for our work, we are willing to work harder for less pay.” The challenge for employers is finding the right way to show appreciation, especially since everyone responds differently to varying types of acknowledgement.

Workplace Diversity

Beyond expanding the talent pool, companies focused on diversity see improved employee performance. With a broad range of life and work experiences reflected, decision making by a diverse group produces better results. A culture that recognizes this and commits to it can truly be more successful.

Work Environment

Environment is one of the most important aspects of culture. In recent years the focus has been on an open environment to improve collaboration and productivity. In fact, about 70% of U.S. companies now have some type of open floor plan. In addition, flexible schedules have also become more common, as has remote work. Companies that focus on flexibility and the environment in which we work see a more productive and engaged workforce as a result.

Personal and Technical Development

Employees embrace opportunities to contribute, learn, experiment, and to develop new skills. They want to know they have a clear path to growth within their company, which ensures a strong future. According to Gallup, only four in 10 U.S. employees strongly agree they had opportunities in the last year that allowed them to learn and grow. This clearly needs to be more of a focus for employers as they compete for talent, especially among younger generations.

Transparent Communication

Fostering a great work culture depends on open and honest communication. Communicating with employees consistently and directly leads to improved levels of trust in their employer. Companies must commit to this as a practice from the highest level throughout the entire organization for it to impact the culture.
While the above isn’t by any means comprehensive, it touches on many aspects of a strong workplace culture. When it comes to the insurance industry, and specifically claims operations, we’ve observed over the years where they are committing resources to building a strong culture, and whether it’s been paying off in terms of business results.

In fact we recently conducted an informal poll of Disability and Life insurance claims professionals to hear more about trends in their workplaces. For example, several told us that they have flexibility in their schedules and work location, and a majority reported working in an open, “collaborative” office environment. When asked whether they believe these factors impact productivity, more felt flex schedules contributed than work environment. For claim professionals this flexibility to when they work may be even more critical given the level of intensity and burnout that can happen in this field.

See also: How IoT May Revolutionize Claims  

Looking at additional factors, having consistent and open communication from management was most influential to their level of satisfaction. An engaged team can only serve insurers well as it means commitment to the work and loyalty to the company.

If we revisit these themes again from the perspective of claims management, here’s what we believe are the most significant ways culture can have an impact:

Shared Purpose

For claim analysts, it can be extremely challenging to keep in mind the greater purpose – deadlines and complicated case details can easily supersede that. Are team leaders reminding them of the meaningful work they do? Does the company frequently and publicly cite examples of how customer lives are impacted by the great work that the claim team is doing?

In reality, the focus for many is on impersonal metrics built from the command and control environment. While we need hard numbers to gauge productivity, the story of what’s being achieved and why it matters is also important.

Employee Recognition

Taking time to acknowledge those claims that were particularly well handled and acknowledging the analyst’s efforts is important. Sharing this with others on the team can then serve to motivate them, causing a ripple effect. A team that sees their value is recognized is simply going to focus on delivering their personal best.

Workplace Diversity

While we often think of race and gender as key aspects of a diverse workforce, what about age? Like the rest of the insurance industry, the graying of the workforce is something to address. Finding ways to attract younger workers and from more diverse backgrounds is necessary to creating a stronger claims operation in the long run. How often do you encounter a Millennial who has figured out how to do something much more efficiently? This “life hack” generation has a lot to offer us in terms of openness to learning new technologies and improving our processes. Likewise, older generations have much to offer in experience and wisdom. Baby Boomers for example are remaining in the workforce longer by delaying retirement, allowing for more opportunities to mentor and collaborate with younger counterparts.

Work Environment

We all have the co-worker who just can’t dial down the volume meter. Or the colleague who insists on talking to themselves for all to hear. Working in an open environment can make these issues even worse, and for those working on complex claim reviews it can be downright counterproductive. While there are benefits to a collaborative space, claim analysts can be challenged to read and analyze detailed documentation, or have sensitive phone conversations in these environments. Creating a space tailored for critical thinking and quiet is important. Even better, allowing them the flexibility to work from home or set their own hours can encourage productivity and efficiency, and greater job satisfaction overall.

Personal and Technical Development

There are many organizations that likely have a focus on technical development for their claims teams. However, rounding out this training to include softer skills like communication and empathy for example can also be just as valuable to their ongoing success. After all, what good is it to be able to follow all processes and remain compliant if they can’t effectively communicate with claimants and make key connections? Offering a well-rounded training program that encourages these additional skills can only serve to enhance job performance and satisfaction for analysts.

Transparent Communication

One of the key components of any engaged workforce is feeling connected with management. When we recently polled claims professionals about several key factors related to their productivity, the level of communication was the item most often given the highest ranking for level of influence. Being consistent and clear in communications is needed with any profession, but especially in occupations like claims where analysts are working independently, and now more often remotely.

See also: Getting Culture Right: It Starts at the Top  

In Summary

Workplace culture is more than just a buzz phrase – there are legitimate and quantifiable reasons a company should prioritize it. For those working in the insurance industry, there are unique challenges to fostering a winning culture – attracting younger workers, keeping up with and leveraging new technologies, and promoting a sense of purpose for their employees to name a few. For those on the front line with claims management, the more engaged and productive they can be, the better the results for not just insurers but their customers.

How IoT May Revolutionize Claims

In a previous article, I addressed the potential for the Internet of Things (IoT) to help P&C insurers reduce non-catastrophic losses in the homeowners insurance sector. Internet-connected products, such as advanced home security systems, water sensors and smoke alarms, are beginning to demonstrate the potential for reduced losses primarily through early notification of emergencies both to consumers as well as directly to emergency responders. But the potential insurer benefit from IoT does not stop at loss reduction; in fact this may be just the beginning. In this article I will address, at a high-level, how IoT can potentially facilitate and improve the claims management process adding even greater value for those insurers that embrace the technology in their operations.


Claims management has always been a challenging part of insurance operations. In additional to the time and expense incurred by the insurer processing and managing claims, the claims process tends to be particularly unfriendly to customers. Even if unintended, bureaucratic processes and slow response times can give consumers the impression that insurers are intentionally delaying, or worse, looking to avoid pay-outs. IoT has potential to automate data collection and communication processes while proving a “record of truth” for events leading to a claim – resulting in lower costs to the insurer and a better customer experience. Let’s look at a few specific ways IoT may make a difference in managing your claims process.

First Notice of Loss (FNOL)

Relying on a consumer to initiate a claim introduces a level of risk and uncertainty for the insurer while simultaneously lessens the quality of the overall customer experience. After a loss, especially a major one, the last thing a consumer wants to do is to pick up a phone and talk to a claims rep. Yes, arguably a courteous and compassionate rep may give a consumer some level of “piece-of-mind.” But candidly customers facing a loss are anxious their insurer is going to be difficult or uncooperative. I would argue that there are better ways to give the customer piece of mind then requiring them to initiate a communication with a call center.

IoT devices can initiate the FNOL process on behalf of the customer and can do so, arguably, in a more compassionate and helpful way. Device alarms can notify the insurer of a potential loss long before the consumer contacts your claims department. The device triggering the notification has a time/date stamp which is of course associated to a customer address and policy number – basically, all the data needed to begin a claim is already available without the customer being inconvenienced. With this data in-hand, insurers might consider a first point of human contact being an outreach message of care and concern. Even if validation or confirmation is required to formally begin the FNOL process this proactive approach would be a unique experience for the customer whose original thought is “oh no, am I covered?”

This proactive outreach may also have potential in dealing with a growing problem of “Assignment of Benefit” the home owners space is starting to see. Engaging a customer a time of loss better positions insurers to guide the customer through more structured remediation processes from the start. An insurer’s first communication might include service provider recommendations based on the loss data from the IoT devices. This process may result in helping ensure that customers are aligned with trusted vendors versus hoping for the best that the situation is resolved properly, in addition to raising the customer service bar.

See also: Insurance and the Internet of Things  

Claims support and fraud investigation

Back to point one, at the time of loss, the last thing a customer wants to do is speak to an insurance company. An insured may be rattled and not paying attention to details that may later become critical to proper assessment of a claim, or worse, a fraud prevention situation. But IoT devices are computers and their data is never subjective nor emotional – it is a record-of-truth. It also doesn’t make a difference if a customer is home or away during an incident, the IoT devices responds the same way registering whatever data it is set to convey.

IoT devices may also be labeled by users with indicators of location and use data – “motion sensor in bedroom”, “leak detector under hot water tank”, “smoke alarm in basement.” The naming of the devices with this level of specificity is a normal customer behavior and one that could enhanced when IoT kits are purposed built to not only help avoid loss but also to facilitate the claims process. These devices also may be recording “normal state” to provide a record of a situation prior to a loss.

Claims processing also doesn’t need to be limited to a single IoT data point. A Smart Home is likely to contain an ecosystem of sensors, many of which have data that can be leveraged in a claim review. For instance, say a connected smoke alarm trips, if the insurer has access to other sensors in the house (e.g. thermostat) a second device data set could confirm the incident with stronger certainty. Obviously these are never-before-available data points that can both help expedite claims processing and potentially lower fraud risk.

Remediation monitoring and confirmation

While the role of a claims adjuster isn’t going anywhere for some time, IoT devices have the potential to provide an early indication of the severity of a claim: what sensors were triggered, their location in the home, response time before a user disarms or acknowledges, etc. For example, a whole-home water sensor may be able to indicate that 200 gallons were dispersed and 5 water sensors in the home may have triggered, indicating a potential moderate to large loss. And while the confirmation of damage scope may still need to come from the customer or adjuster, there is an early indication on the potential loss – and the urgency of remediation.

A bit more futuristic, but IoT devices may also play a role in monitoring the remediation process. Devices may confirm the work process or the completion of work. Humidity or air quality sensors may confirm that a premise is “back to normal state.” Video imagery from IoT devices may record before, during and after imagery to confirm work done to a standard. Sensors may even reset or re-calibrate when all parties have finally agreed “work complete.” This process may even be triggered by the Insurers system of record in claims processing.

Once the sensor is seen as an enabling tool for remediation, I believe the customer will see it as an incredibly supportive piece of technology provided by their partner, their insurer.


Of course, with all these technologies, there are important considerations on behalf of both the insurer as well as the customer.

Customer awareness and privacy – Concerns around “big brother” and privacy are very real – but the risk can be well managed over the long run. However, consumers must feel the risk/reward ratio is balanced. The best way to do achieve this is through transparency. Let your customer know you’re your objective is to create a better product – and better yet, show them by sharing the benefit in return for your access to their sensor data. Engage the customer and ask them for their preferences when it comes to things like communications or emergency outreach. Consumers are very savvy and tomorrow’s technology requires a level of transparency yet to be seen by the market. Encourage your customers to be part of the journey.

False positives – Computers don’t exaggerate or lie, but sensors can be accidentally triggered. Early on there will be misses and false positives and some will be costly, but that is typical in all early technology cycles. Overall benefit to all insureds will be seen quickly if the process is allowed to mature. As consumers begin to realize the value of Smart Home goes beyond simply lights and doorbells into true home safety (and insurance benefits) engagement will grow and understanding the best course of action with the data sets that available will become clear to everyone involved. If need an example illustration, just look at telematics and auto insurance.

See also: Smart Home = Smart Insurer!  

Costs – IoT device volumes are still relatively low and functionality is still limited. As the insurance industry commits to a vision, deployments will become more widespread driving down price and raising the quality bar. This is highly consistent with any early technology deployment. If insurers engage, companies will double down efforts to meet the industry’s specific needs. And, no doubt, new business models will emerge to support the economics.


The IoT market is maturing quickly, and one of the biggest beneficiaries may be the insurance industry. Looking at the variety of ways IoT can benefit your organizations (loss prevention, claims management, customer engagement, etc.) is key to building an effective business case in this early stage. Getting involved with the IoT ecosystem now will both better prepare your organization for the market evolution as well as help ensure that your needs are well represented as the technology matures. With the above benefits in mind, I hope you agree that claims management may prove to be one of the pillars of the long-term IoT business case.