Tag Archives: claims

Future Is Already Here in Claims

A perfect storm of macro factors has supercharged several trends in the insurance industry, producing almost touchless processes for claims and enabling cycle times of seconds, minutes and hours instead of days and weeks. Advancements in areas such as machine learning, robotics and connected IoT devices will continue to bring a dramatic shift in the way claims are processed, managed and reported and will result in better operational performance and improved customer satisfaction.

How We Got Here

Traditionally, insurance companies were organized into several distinct and separate operating verticals; product and underwriting, sales and marketing, claims, finance and investment. Adding to the complexity, the property and casualty segment of the industry was further divided into personal auto and home, commercial auto, property and liability, specialty lines and workers’ compensation. The mountains of information needed to enable a meaningful digital transformation of these enterprises were trapped inside numerous vertical silos and resided on a wide variety of separate storage systems and architectures.  

Initial efforts to digitize these disparate operating verticals soon revealed that only an enterprisewide digital transformation strategy would yield the results required to justify the effort, disruption and costs. These initiatives required well-informed, committed, visionary leadership to marshal and lead management teams and organizational staff through the necessary battles. Not all insurance leaders were up to the challenge, but those who were won differentiation in the market.

Digital Transformation and Insurtech 1.0

Meanwhile, technologies that enabled digital transformation continued to emerge from incubators in Silicon Valley and beyond, further complicating the effort to design and implement a digital enterprise strategy. As fast as carriers could incorporate a new technology into the enterprise, it was superseded by newer, better and more effective solutions. 

This same period also saw the rise of insurtechs, basically tech-enabled digital startups that planned to compete as “full stack” insurance companies directly against well-established insurers whose attempts at digital modernization were weighed down by legacy systems and siloed data. Professional investors, who had accumulated unprecedented levels of available investment capital (referred to as “dry powder”) seeking deployment, became enamored with the insurtech segment and provided firms with all the development capital they needed while driving their valuations to previously unthinkable heights. The investment thesis was that these companies would either take significant market share from the established carriers or would be acquired by those same carriers as a defensive strategy. Both assumptions turned out to be correct.

See also: The Connected World: How It Changes Claims

During this period, which we will call Insurtech 1.0, the newcomers viewed themselves as direct competitors to the incumbents, and, similarly, incumbent carriers felt the pressure to transform more quickly or lose ground to the insurtechs. However, after almost a decade in this mode, both sides began to adopt more pragmatic strategies that involved strategic alliances, partnerships and even investment, which we will call Insurtech 2.0

Claims Transformation and Insurtech 2.0

Of all the operating areas within the insurance enterprise, claims arguably warranted and received an oversized percentage of attention in terms of investment, innovation and digital transformation. 

The reasons for this were apparent. Claims costs consume an average of approximately 80% of all premium income. Claims also represent the single best opportunity that insurers have to interact with their customers and deliver on the insurance promise, at what is frequently referred to as “the moment of truth.” Because consumers had already become enamored by the allure and convenience of mobile, digital experiences delivered by the “FAANGs” (Facebook, Amazon, Apple, Netflix and Google/Alphabet) and others like them, customers naturally began to evaluate all other service levels by those standards. 

Claims has historically been a complex, labor- and paper-intensive process with stubbornly long cycle times involving large numbers of different types of service providers in fragmented industries. Many of the providers were small, independent, unsophisticated businesses, so effective digital transformation seemed overwhelming, if not impossible. Here again, strong visionary leadership, new technologies and large pools of investment capital combined to begin meaningful digital claims transformation, initially in portions of personal auto and eventually across the entire end-to-end claims process. Advancements in artificial intelligence, machine learning, robotics, connected vehicles, drones and IoT devices brought a marked shift in the way claims were being processed, managed and reported and improved operational performance as well as customer satisfaction and retention.

COVID-19 and the Future of Claims

The global pandemic emerged suddenly early in 2020 and instantly changed everything about the way we lived and worked – and insurance claims were no exception. Indeed, the pandemic forced the acceleration of the future of claims to arrive much sooner than anyone expected.

While some types of claims, including personal auto, temporarily fell significantly due to a decrease in travel, claims overall still required attention, even as insurance offices were being vacated. The industry, to its credit, repositioned almost all of its hundreds of thousands claims professional to work from home within two weeks. Now, the technologies that were driving earlier transformation became critically important as the virtual and touchless claims concept became a reality almost overnight. Insurers’ use of customer self-service, photo estimating and artificial intelligence-supported claims expanded at a record pace, exceeding double-digit growth since just the beginning of the year, as auto insurers accelerated the use and adoption of digital tools in response to COVID-19. Digital claims payments also attracted increased attention as the printing and mailing of paper checks was no longer a practical option and claimants needed their settlement funds more quickly than ever.

Connected Claims

Fortunately, connected autos, homes, property and even people have proliferated and become the backbone of connected claims, so the future is bright.

See also: Managing Risk in a Pandemic  

To learn more, join us for Connected Claims USA Virtual on June 23-25 as Insurance Nexus by Reuters Events welcomes an expected 10,000 insurance claims industry executives, professionals and ecosystem partners to participate in an unprecedented virtual learning and networking experience.

COVID-19 Will Put ‘Tele’ in a Lot More Than ‘Medicine’

In the early days of the internet, a professor at Northwestern’s Kellogg School of Management said something to me that’s been rattling around in my head ever since: “Once you can manage something by wire, it doesn’t matter how long the wire is.”

The professor, Mohan Sawhney, was referring in particular to the possibility of managing factories from a great distance, but his insight from the late 1990s describes so many other possibilities, too. Basically, once a process becomes digital, you can do it from anywhere — and COVID-19 is greatly accelerating the digitalization of insurance processes.

So, let’s ponder for a moment what has historically been done face-to-face that will now be done remotely. Lots has been written about the surge in telemedicine, and that’s certainly an important trend that seems likely to continue, but that’s just the start. Remote handling of claims and sales will get a big boost from our experience during the pandemic and, perhaps, fear of future ones. So will an area I hadn’t thought much about until recently: property inspections.

Telemedicine has dominated the “tele-” discussion for good reason. We’ve been social distancing for months now, but people still need medical care beyond COVID-19, and a lot have realized that a doctor doesn’t have to say, “Stick out your tongue, and say ‘aahhh,'” to diagnose and treat many issues. Telemedicine had already been proven as a concept. It was just being held back by regulatory issues such as how to license doctors communicating across state lines and by the sort of uncertainty that comes as any truly new approach is adopted. So, when COVID-19 demanded remote treatment, telemedicine was ready.

Telemedicine is so much more convenient for both doctors and patients that it will continue to grow, though I see it becoming an integrated part of healthcare rather than a separate form of care. A doctor can’t fully evaluate me remotely, but if tele-visits become part of my relationship with my primary care physician, they could remove any worries I might have while helping the doctor spot problems sooner than he or she would if we waited for my annual seven minutes in front of the doc. Similarly, telemedicine capabilities could be added to what on-site clinics offer at many bigger companies. Telemedicine is already starting to be done to triage injured workers. I can imagine plenty of uses in caring for mental health, even beyond what’s possible via phone hot lines; a sympathetic face can mean a lot. Elder care seems promising, too — just looking into a nonagenarian’s eyes and talking to him or her for a minute can tell you a lot. (My mother, who just turned 90, still beats most of us at bridge online, so I’m excluding her from the possible beneficiaries of any acuity assessment.)

(If you’re interested in reading more about the possibilities of telemedicine, this article from McKinsey is quite thorough.)

Claims have been getting attention, too, because they were already heading in a do-it-yourself direction before COVID-19, and the trend has picked up speed. I remember how radical it seemed when Robin Roberson founded WeGoLook and we helped her promote her network of thousands of “lookers,” who were dispersed around the country and could go take photos of damage, saving an insurer the cost of dispatching an adjustor. But who needs lookers now? Everyone has a camera and, guided by a remote expert — on as long a “wire” as you like — can document the damage without the need for a visit by an adjustor. Claims will keep getting more “tele-,” and probably quickly.

Sales have been slower to go remote. People do much of their research online but have still finalized an awful lot of contracts face-to-face. Not so much now. Avoiding handshakes and wearing masks has taken a lot of the magic out of in-person meetings, even when they’re allowed. And, now that sales can be done remotely, we’ll have to see just how remote they become. I have a feeling I won’t see nearly so many “Insurance” signs in strip malls any more.

Property inspections have already gone a bit “tele-.” It’s now possible to have a drone fly around a house and take photos of the exterior while providing exact measurements, without making a guy with a tape measure spend an hour crawling through the bushes and climbing onto the roof. But that seems to be just the beginning, partly thanks to COVID-19. Startups such as Flyreel are enabling DIY inspections: You walk around your home or apartment, documenting everything that’s there while the expert on the other end of the video call asks questions. “Are those countertops granite?” “Could you go a little closer to the wall; I need to see if that’s dry rot?” You not only save time by not having to dispatch an inspector but wind up with a precise, video record of the state of a property — “Sorry, but no, that couch wasn’t brand new….”

Brett Jurgens, who is the CEO at an interesting “smart home” startup called Notion (and who introduced me to Flyreel), speculated that DIY could move beyond inspections in a way that blends insurance and maintenance. Why would you have to call a plumber, for instance, when you might be able to just call one, show him or her the problem and ask for advice? How many other visits could be handled remotely, perhaps as part of some sort of subscription service? (Free idea, independent of insurance, for someone: Having killed my share of plants over the years, I’m betting some “plant doctor” could sell inexpensive subscriptions for remote monitoring and advice.)

I think that Jurgens is on to something and that, if we let our minds roam, we can imagine all sorts of possibilities for remote handling of processes, well beyond healthcare, that now just have to happen in person. And that’s without getting into the sort of internal realignment that companies in the insurance industry will go through as they decide how much work will be done in the office and how much can be done from home — another topic for another day.

Stay safe.


P.S. Here are the six articles I’d like to highlight from the past week:

4 Key Changes to WC From COVID-19

How companies respond to these changes in workers’ comp may determine their survival in a challenging economic environment.

How Startups Will Save Insurance

The evolution is unstoppable because innovation benefits both the insurance markets and the underlying consumer.

Is Insurance Office Going Away for Good?

Take this time to plan how to restructure your business. As things settle out, you need to have permanent adjustments ready to go.

PRIA: A Tale of Two Policyholders

An uncomfortable reality is that a TRIA-style “make available” requirement would separate policyholders into the haves and the have-nots.

Planning for the Unknown Unknowns

In the New Normal, you cannot do as you did in the old normal, just harder. You need a new approach to strategy.

Now Comes the Flood Season

We can’t expect collective, nationwide resilience to flood events without innovation from FEMA and decisive action from Congress.

The Pandemic and a New Ecosystem

The plague that is coronavirus continues to threaten our way of life and our very existence.  

And while we wait for our best scientists and Big Pharma to develop and deliver the vaccine we so desperately need to begin the return to some semblance of our prior lives, it is notable that finance and insurance – the nation’s third-largest industry – is coping better than most would have ever imagined, thanks to the technologies that have been gradually but surely emerging for at least the past two decades.

Now, with few if any acceptable choices, these technologies and the benefits they offer participants in the insurance ecosystem are being more eagerly embraced and adopted by insurers in the battle they are waging for their survival. Artificial intelligence, in all its manifestations, drives many solutions. It helps us transform the digital rivers of data flowing between us and our many connected devices and facilitates effective real-time decision making. As noted on April 30 by Microsoft CEO Satya Nadella, “We saw 2 years of digital transformation in two months.”

WFH (work from home) is a perfect example and, defined more broadly, encompasses video conferencing, distance learning, educational and training sessions and internal business communications platforms. Platforms such as Zoom and Slack are well-known solutions, but dozens of similar services have proliferated. Artificial intelligence powers all of them and allows for total individualization of communication preferences. Insurers have been able to leverage them in operations, and in a matter of just weeks have redeployed thousands of inside employees from corporate buildings to their own homes, hardly missing a beat. In many cases, customer experience has actually improved as distributed workflow algorithms ensure better matching of customer profiles with staff expertise and skill sets, while also reducing the associated potential risk of litigation.

The claims process has become another major beneficiary of artificial intelligence and other new technologies, including computer vision, machine learning, digital customer self-service and electronic claim payments. Contactless (or touchless) claims is now a reality, with some large insurers reporting up to 50% use of this method across all claims.  

In a world where claims are submitted and paid without physical inspection and validation, fraudulent claims detection becomes an even higher priority, and here again solutions incorporating artificial intelligence, predictive analytics and computer vision are being deployed effectively. The recent partnership announced between Shift Technologies and Snapsheet is a perfect example, and there are many more in the works and underway. 

See also: COVID-19 and the Economic Downturn’s Effect on P&C Insurance: An Opportunity for Technology? 

Analytics also plays a critical role in streamlining claims settlement, which is recognized as a primary driver of customer loyalty and retention. This includes the current rapid adoption of digital claims payments, which speeds up the process while removing significant processing costs for carriers and getting money owed more quickly to customers; for many, cash flow has become more important than ever. The speedy settlement of claims has previously meant higher costs and a risk of overpayment, especially in high-volume catastrophes but by employing AI technologies these risks are now being mitigated.

Here is a partial list of the many additional ways in which AI and technology will play an increasingly critical role;

  • a solid working knowledge of AI and technology will become a prerequisite for even entry-level employees and most certainly for organizational advancement
  • the nature of risk has changed, and AI allows carriers to respond in real time (e.g., several large life insurers ceased issuing new policies on those over 75 almost immediately after COVID-19 altered mortality rate tables
  • data allows management to navigate change, and AI is an important tool in generating operational road maps
  • remote work forces present new management challenges in maintaining morale, motivation and corporate culture; AI enables automated monitoring and appropriate development and testing at the individual level
  • in a world of limited resources, partnerships will become more critical, and, for those that incorporate AI, relevant corporate expertise will be mandatory 
  • continuous learning and technology development will help meet carriers’ long-term needs and goals

In an impressive example of the power and potential for technology in the insurance industry, conference production companies have quickly pivoted scheduled live events to virtual alternatives. (Insurance Nexus by Reuters Events has reimagined its Insurance AI and Innovative Tech USA” conference scheduled for Chicago and is presenting it as a free, conference and meeting platform on May 27-28. The conference features over 30 speakers, 20 case studies, thought leadership discussions and fireside chats with key insurance decision makers, interactive sessions with live panels, Q&A and polls. A digital exhibition will feature over 20 solution providers and a one-on-one meeting service will connect participants sharing common interests. You can register here.)

As much as we all wish coronavirus had never happened, it has supercharged innovation in the insurance industry. Some changes are welcome, many of which are likely to be permanent, and which will benefit all stakeholders in this critically important industry.

How AI Can Stop Workers’ Comp Fraud

Wondering how AI can help detect medical provider scams? Wonder no more.

Artificial intelligence (AI) is redefining work in nearly every industry thanks to the increase in accuracy, efficiency and cost-effectiveness that AI-based applications offer. One of the latest industries to benefit is insurance, where applications are now being deployed to help detect and reduce provider fraud through advanced predictive tools. Claims payers identify fraudulent providers early in the life of a claim and root out bad actors while saving organizations millions of dollars.

The Fraud Problem

Fraud involves deliberately presenting false information to extract a benefit. The most common examples of provider fraud include “phantom billing” (billing for services not rendered), submitting bills for more services than are possible in a provider’s day, providing services unrelated to the injury, using unlicensed or non-credentialed individuals to provide medical services, getting paid kickbacks in exchange for sending patients to third parties and referring patients to entities (such as laboratories or testing facilities) in which the provider has an ownership interest.

While most providers do not engage in fraud, those that do are extremely costly. According to the National Insurance Crime Bureau (NICB), workers’ compensation medical fraud costs approximately $30 billion per year in the U.S. alone.

Fraudulent provider behavior is hard to detect and prove, particularly in workers’ compensation data systems. Advanced data analytics based on AI, however, offers opportunities to overcome the inherent weaknesses in these systems while developing methods to identify and curb provider fraud. Let’s take a look.

Fragmentation of Payers

One of the biggest issues in provider fraud is that no one organization has more than 5% of workers’ compensation market share, so none can see the entire picture of a provider’s claims. This can cause a whole host of issues. For example, if one company has identified a fraudulent provider, other companies may not have this information and continue payments. In states where fraud information is publicly available, providers simply begin practicing in other states, avoiding the state that sanctioned them.

Using AI tools, however, organizations can tap into multipayer pools of aggregate information to spot fraudulent patterns quickly and reliably without compromising payer, employer and employee information. It also makes it easier to flag and curb behavior across a multipayer database.

See also: Untapped Potential of Artificial Intelligence

Inaccurate Provider Identification

The constantly changing complexity of provider identification is another major challenge. Data is often tied to names. Fraudulent providers know this system weakness and frequently change their organization names and addresses as well as other identifiers.

Using AI, data scientists can now reliably link multiple bills from the same provider using a National Provider Identifier (NPI) developed by the Centers for Medicare and Medicaid Services (CMS). Almost all providers have an NPI, and some have more than one. When supplemented with taxpayer identification (FEIN) numbers and license numbers, NPIs can reliably identify 95% of medical providers. As a result, machines can overcome the name game, detecting the long-term, multiyear activities of almost all providers and provider organizations.

Long Lag Times

The interval between when an instance of fraud occurs and when it is detected is often several years. For example, a provider may submit a bill on day one for services unrelated to the injury; the bill will be submitted for review 30 days later and will likely be paid in another 30 days. This practice will be repeated dozens of times by the same provider on the same patient over the course of months. If fraud is detected, the provider will have already been paid, and financial recovery is difficult.

To combat this problem, AI can detect the entire course of treatment on the same claim from the first through subsequent billings over multiple years. Software tracks the diagnoses and the number of procedure codes billed by the same provider on the same claim — per day, per month and per year. As a result, claims staff receive real- time alerts and can intervene when a fraudulent provider initiates treatment on a claim.

Complex Provider Supply Chains

The entire fraud supply chain often includes attorneys, medical providers, outpatient and inpatient facilities, interpreters, testing facilities, medical device suppliers, pharmacies, copy services and transportation services. Unless data sets capture all or most of these moving parts, the chance of detecting fraudulent patterns is very difficult.

With AI, it’s getting a lot easier. Data scientists can use aggregated data to track sequences of out-referral and in-referral, exposing links between fraudulent individuals and entities. Sophisticated techniques isolate consistent and repeatable patterns of relationships between multiple providers and third parties. Data scientists then can graphically display suspicious network clustering patterns inherent in fraud networks.

And these are just a few examples of how AI tools can greatly increase the detection of fraud.

See also: Impact of COVID-19 on Workers’ Comp

Defining the Future of Claims

AI differs from more traditional research approaches because it can generate its own rules to detect fraud and look across large data sets nearly instantly. Via machine learning, databases are continually refreshed, becoming smarter and more effective all the time. By incorporating AI-based solutions, insurance payers can defeat fraud at a systemic level and realize significant financial benefits in return.

As first published in The CLM.

Claims Industry Set for Telecommuting

Insurance carriers and claim professionals deal with various catastrophes each year, so it was only fitting that when COVID-19 struck they were some of the first prepared to revert to “emergency work from home mode.”

With many other industries trying to determine how (and if) their workers can take on remote duties, the insurance world led the way with flexibility and (for the most part) ordered adjusters to telecommute so they would not miss a beat of their daily workload. 

This trillion-dollar industry is fairly secure in most crises (the popular mantra being that “everyone needs insurance.”) Understood are the IT capabilities needed in advance and the supervisor’s faith in employees, as they’ve been doing this sort of thing for years. It was as easy as a keystroke from insurance upper management to keep workers from driving to their respective claim centers with their laptops and instead plugging in at home and being ready to go. 

Some insurance companies were first to respond in the U.S. by canceling all in-person (unnecessary) meetings and going virtual. They left some of their fellow businesses they share office space with in the dust as those other companies continued to mull over their options (or until the point of being bound by local government orders). Carriers have, for the most part, been eager to protect their workers from risk (isn’t that what insurance is known for?) A possible hazard to staff meant a swift and immediate decision to work from home. 

Many carriers have realized the benefits of this arrangement, and even that many employees may put in more hours when working at home, saving themselves a tiresome commute (the average worker in the U.S. commutes over four hours a week, and some high-traffic areas require much more than that). 

See also: Moral Imperative for the Insurance Industry  

Most carriers also subscribe to the notion of in-office safety, encouraging those who are sick to work remotely, whereas some organizations may suggest workers come in or otherwise use a paid time off (PTO) day (few employees are pleased with that option as the average PTO days per year that Americans receive are quite low compared with other countries – another conversation, however!).

Many articles have been recently published with “work from home” tips; below are some of the more applicable to insurance industry professionals:

IF Insurance has penned a column called “How to work from home safely and efficiently?” It discusses an important topic in claims as it suggests that “Remote work provides several benefits, such as the possibility to focus deeply on specific tasks that require uninterrupted concentration.” For that large litigation claim file with extensive injuries, this makes much sense; fewer interruptions makes it easier to focus on complex claims. Some other useful tips of the article include letting family members know you need to work in peace and keeping an eye on ergonomics and the setup at home (is that monitor at the correct level?). Planning your breaks with a clear start and end time is also key. Remember to keep in touch with colleagues, and don’t isolate yourself completely!

Working From Home Can Mean You Never Stop Working” is a recent piece from Philadelphia Magazine that reminds us all to keep a better work-life balance while doing so and setting rituals for logging on and off while not falling victim to some of the various pitfalls. Remember to move around so as not sit in one spot all day. Have a list of your priorities for the day and use noise canceling headphones if needed to minimize distractions.

See also: Claims: Beyond the ‘Moment of Truth’  

Arch Daily’s website discusses tips for architects adjusting to the new experience of working from home. Largely, these professionals are used to collaborating with others in an office setting and now need to learn how to use digital technology to replicate those interactions. The article offers very useful information for experts in this field (and all others) to adapt to the times we face.

Will other industries learn from insurance and be well-equipped in the future? 

Or will the world change and move drastically to remote working after realizing some of its benefits? And is it really any surprise that insurance carriers are setting the example? 

After all, insurance and risk management by definition set out to identify, evaluate and prioritize risks and apply the use of resources to minimize the impact of unfortunate events (like right now).