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Using Catastrophes to Rethink Claims (Part 2)

Digital technologies have the power to re-design insurance. A host of benefits lie within the front-end customer experience, but insurers stand to gain just as much from the digitalization of the back-end operations, including the claims process.

  • According to the Insurance Information Institute, 64% of insurance premiums (nearly 2/3 of every dollar) are used to pay claims and adjustment expenses.
  • Digital answers to loss reduction and loss prevention stand to yield the greatest profit for insurers.

This is critically important in an era where catastrophic claims seem to be more important and subsequently have the potential to do significant damage to an insurer’s bottom line.

In our last blog, we looked at the impact of digital technologies on the claims value chain. The hurricanes, hail storms, tornadoes and fires of 2017 have given all insurers a wake-up call to claims preparedness. We listed out many of the ways that technology has the potential to improve catastrophe management and claims experience.

In this blog, we’ll look more closely at operations. How can operations look at catastrophic events differently? How can it prepare for both internal and external impact? Can our redesigned claims experience create real value?

A holistic approach to catastrophic claims

From Aug. 12-23, Hurricane Harvey was tracked and classified between a tropical storm and a tropical wave. It suddenly started gaining strength as a tropical storm on Aug. 24. Overnight, it rapidly became a Category 4 hurricane, making landfall at Rockport, TX, on the 25th.

In the days prior, NASA and many U.S. insurers shared a concern. What would happen to the city of Houston? Hurricane Harvey was not only going to do catastrophic damage, displace thousands of people and potentially disrupt many businesses, it was going to hit the Johnson Space Center, home to the operations for the International Space Station (ISS). The ISS receives as many as 50,000 different commands from Houston in any one month, making corrective maneuvers and steering the station away from harmful debris. Systems could not go down without safety concerns for the ISS.

See also: Using Catastrophes to Rethink Claims  

NASA is adept at preparing for anything. When they aren’t launching rockets, monitoring rovers and steering the space station, they are running through scenarios to improve their ability to handle any situation. In this case, they did have a plan. They remained vigilant, and they rode out the storm.

Insurers now have NASA-like capabilities to use data and digital technologies to their advantage. They, too, can look at the entire sphere of a catastrophic event and find ways to protect themselves and their insureds while optimizing every asset.

Pre-Crisis Efforts

Insurers are known for standing by their clients in the aftermath, but what about standing by their clients before crisis hits?

Last month, in one of the biggest evacuations ever ordered in the U.S., roughly 6.3 million people in Florida — more than one-quarter of the state’s population — were told to clear out from areas threatened by Hurricane Irma. Another 540,000 were directed to move away from the Georgia coast.

Insurers can wait for the government to issue general warnings, but they can take control of communications with their customers by adding digital capabilities. Insurers are armed with ever-improving risk models. They have unprecedented access to customer-specific, property-specific and economic-related data as well as other types of valuable data, including climate and location data, traffic data and telematics data. Insurers are increasingly pulling this big data together for real-time analysis, cognitive learning, insight and decision-making … including to minimize or eliminate claims.

Insurers are also in a better position to help properly categorize storms and crises, leveraging digital technologies such as analytics and artificial intelligence. Using this data, insurers can personalize communications through digital channels that can reach the people that are in the risk zones with highly specific loss and risk prevention measures. Texts, e-mails, automated phone calls with clear directives can greatly help customers who are often panicking, lack detailed information or can be indecisive. This is the trending wave of insurance transformation at its best. Preventive communications can be targeted individually, giving insureds all of the vital information they need to protect themselves and their property, an area of increasing interest and expectation by customers we identified in The Rise of the New Insurance Customer and The Rise of the New Small Medium Business Customer research.

In Majesco’s recent white paper, Changing Insurance for the Digital Age, we discuss how the future is not only becoming more foreseeable, but it is also becoming more volatile. The result is that insurers will be shifting from risk coverage to risk prevention. The most sought-after portion of the claims value chain may be the network of data and technologies that prevent or reduce claims. These prevention services will soon be new sources of revenue.

 During the Catastrophe

During the 2016 Ft. McMurray wildfires in Alberta, Canada, an estimated 88,000 people were displaced from their homes. Most had no idea where to go, and many refugees found themselves without adequate short-term housing. The digitally enabled insurer can help direct insureds to likely locations of refuge and even offer housing discounts or pre-paid lodging to those who are displaced. This kind of communication and service will build strong loyalty among insureds, while providing marketing with a host of compelling stories with happy endings.

What happens, however, when the insurance organization itself is in the same line of storms, fires or earthquakes?

NASA, during Hurricane Harvey, had contingency plans in place. Should ground teams need to be evacuated, they would be moved temporarily to Round Rock, TX, then for a longer term to the space center in Huntsville, Alabama.

Many insurers had their claims adjuster crews prepared, and drone capabilities in place, but were less prepared if their systems and operations were affected, primarily due to their large on-premise operations.  While many insurers have disaster recovery plans, they must ask themselves if their operations can scale rapidly to handle the onslaught of calls, claims and needs. How will operations be managed remotely if staff are unable to get access? Which customer service centers may need to be relocated, and how will they handle the potential of consecutive catastrophic events … like what we saw in Houston and then Florida?

See also: Catastrophes and ‘Do Little’ Syndrome  

Cloud business platforms are perfect for handling claims operational requirements. They are always on, most often are located off-site, are easily scalable and often are managed by someone outside the organization … providing access to critical resources. While systems are attempting to handle hundreds of adjusters at once, customer service may also be handling thousands of customer inquiries. Insurers need the capacity and stability that a cloud platform can supply. Cloud platforms are the perfect foundation for constructing a catastrophe-proof claims value chain.

Post-Crisis Restoration

In addition, the right cloud platforms can handle the plug-and-play technologies that are increasingly used by claims departments for post-claim services. They can handle images and video from drones, photos from mobile phones and tablets, simulation data, cognitive computing decisions (with speed) and a high volume of communications — automated, human and chatbot.

These same technologies will aid in adjuster mobilization, prioritization and routing. In the next blog in this series, we will look specifically at how digital technologies will help claims to build relationships with customers. Where are the effective touchpoints in the claims process? How can an insurer “take control” in the relationship and gently guide policyholders into best practices and safer circumstances? What can insurers do to stand by their policyholders during the restoration or rebuilding process? At the same time, we will look at how insurers in the future will use data and AI to spot fraud and cut costs.

For a deeper look into the data strategies and predictive analytics that are having an impact on the complete insurance value chain, be sure to read Majesco’s report, Winning in a New Age of Insurance: Insurance Moneyball.