Tag Archives: straight-through processing

Getting to ‘Amazon-Like’ Auto Claims

Last week, we debuted our “Connected Insurance” webcast series with ““DISRUPTION: Technologies Transforming the Industry.”  I had the pleasure of serving as host and moderator, and by all accounts the session was well received. 

Our underlying theme for the session was how digital technologies, including AI, are transforming the insurance economy. More broadly, our expert panelists shared their perspectives on the state of digital transformation across the auto insurance ecosystem and views on  the technologies poised to revolutionize how the process works near- and long-term.

Participants represented four key inter-dependent industry segments:

  • Collision repairers/MSO (Matt Ebert, CEO, Crash Champions) 
  • Auto insurer claims management (Scott Kohl, AVP Claims, Kemper)
  • OEM parts distribution (Dan Ducharme, senior manager, wholesale parts, VW America)
  • Insurance economy platform provider (Marc Fredman, chief strategy officer, CCC Intelligent Solutions)

The premise of the session was this: A billion days elapse every year between when auto claims are opened and when claims are resolved. Consumers are losing patience with industries that don’t keep pace with modern experiences, and disruptors stand ready to deliver change. 

Several important observations became apparent as the discussion unfolded:

  • Technology has and will continue to transform how business is conducted in every segment; the rate of change is accelerating and presenting its own challenges, including shortages of skilled staff 
  • The new technologies having most impact across the entire ecosystem are telematics, auto photo inspection and computer vision, advanced driver-assist systems (ADAS) and electric vehicles (EVs)
  • The companies in all four segments are focused on exactly the same outcome but are achieving it in different ways – they seek safe and proper repair of damaged vehicles, resulting in a positive customer experience and ultimately brand loyalty and retention 
  • The collision repair industry has changed most dramatically over the past decade, driven by consolidation financed by private equity investors
  • Digitization of the thousands of steps involved in the auto claims process, and integration between segment participants, is enabling the customer experience associated with auto claims to begin to approach the “Amazon standard” 

At the industry segment level, the following panelist comments struck me as particularly insightful and informative:

Collision Repairers/MSO

Matt Ebert noted that the new technologies are definitely making the “front end” of the auto claims process faster, but the offset for collision repairers is that the greater complexity of vehicles (e.g., ADAS) creates new challenges for repairers; even what used to be a simple bumper repair may now involve scanning and recalibration).  

Matt also pointed out that repairers are affected by the large number of different repair requirements from carriers and OEMS and often find themselves “in the middle” of the dynamics that exist between some insurers and OEMs. On the subject of OEM certified repair networks, Matt said that, while his participation in these programs helps brings some incremental repair volume to his repair shops,  particularly for higher-end vehicles, to him right now participation is more about credibility with insurers and consumers.

See also: Key to Transformation for Auto Claims

Auto Insurer Claims Management

Scott Kohl made the point that what was only recently thought of as innovative in auto claims is now table stakes and that planning cycles that used to be in the five-year range are now only two to three years. He added that there is a constant need to be ready to pivot quickly in response to events and market changes. He also stressed the importance and value of using AI to connect the supply chain for multiple use cases including automating accident management triage, parts ordering from real-time first notice of loss (FNOL) and total loss identification and resolution as that percentage continues to rise toward 25%.

OEM Parts Distribution

Dan Ducharme also referenced automated parts ordering using on-board vehicle telematics to pre-position parts inventory based on vehicle and damage detail and geo-location to reduce overall “keys to keys” time for customers. He also reinforced that auto makers are focused on keeping customers for life, which further emphasizes the importance of customer experience and satisfaction.

Insurance Economy Platform Provider

Marc Fredman pointed out that while some of us talk about emerging technologies and future auto repair process capabilities, a good deal of it is happening and available today; he indicated that CCC has 30,000 customers using their technology across all segments represented here. Marc also indicated that the building blocks for an Amazon-like experience exist today, as exemplified by the CCC Engage and CCC Car Wise solutions in use in approximately 25% of their shops for sharing photos and estimates between consumers, insurers and shops and enabling insurers and consumers to schedule repair appointments. He said that over 200 million shop calendar entries have already been made in this way. Marc also said that insurer adoption of digital solutions is significant, with some insurers managing 25% to 30% of assignments. Other examples of digital building blocks already in market include 50 million text messages that employ AI and enable insurers to better manage claims intake and provide text messages to consumers tracking repair status and “ready for pickup” notices.

The Amazon-like Auto Claim Experience

Having worked in the claims technology space for more than 35 years, I find it stunning to look back and realize all the improvements that technology has already enabled. It is even more exciting to realize how much more improvement can be expected and see the rate of that change accelerating. This change is driving collaboration and cooperation between key participants in this extensive supply chain to a level until now unimaginable. 

The final pieces of technology required to achieve the long-elusive goal of delivering straight-through-processing of auto claims are now falling into place. A couple of prime examples include artificial intelligence and computer vision to assess damage and produce estimates from photos and digital claims payments speeding settlements to insureds, vendors and lenders. 

A truly Amazon-like auto claim and repair process is finally at hand.

Small Commercial: Digitizing Distribution

How far along are commercial lines carriers in delivering digital solutions to their agents and other distribution partners? Answering that question depends on whether you are a glass half-empty or glass half-full type of person. The pessimist might say: Despite huge investments in technology over the past few decades, there is still a great deal of manual processing; the time for the rate-quote-bind process is too long; and the goal of truly making it easy for the agent to do business with the carrier is still elusive. The optimist would cite enormous industry progress, as many companies have increased straight-through processing (STP) to a significant percentage of the business; digital self-service capabilities for both sale and service are widespread; and agent-carrier connectivity, in general, enables astounding volumes of electronic business flow.

SMA recently surveyed carriers focused on the small commercial market to assess the state of digital capabilities offered to distribution partners, the barriers to implementation and adoption and the plans for enhancing or delivering new digital capabilities. We discovered that rather. than taking a glass half empty or half full approach, the better analogy is a road trip, with the kid in the back seat regularly asking, “Are we there yet?” It turns out that the question is not easy to answer. Once you get by the lofty goals of STP and ease of doing business (EODB), there are a variety of specific functional capabilities that are important. By the way, STP and EODB are still the top two reasons that carriers invest in tech solutions for distribution, and they do provide a north star for plans in this space.

SMA’s research tracked 14 different digital sales-oriented capabilities and 17 servicing capabilities, starting with a carrier’s satisfaction with the state of the offerings to their distribution partners. Suffice it to say that, while some are satisfied with their offerings, many are not. For example, only about a third are satisfied with their quoting capabilities. Satisfaction levels on the servicing side are higher, but there are still many companies that are dissatisfied or do not offer the digital capability. In terms of plans and projects, there is lots of investment and activity in addressing the areas where companies believe they are weak. For example, data pre-fill is the top project area for sales capabilities as it is a critical starting point for achieving STP.

See also: Agencies Turn to Networks for Growth

There are both business and technology roadblocks to success in distribution technology. For example, few will be surprised to learn that limited IT resources are the #1 barrier on the technology side. In short, this is a very critical but complex area of the insurance business, and the industry as a whole is moving to enhance the digital capability provided to distribution partners. It is a journey, but, like that proverbial kid in the back seat, many executives will continue to ask, “Are we there yet?”

For more information on commercial lines distribution expansion strategies, see our recent research report, “Distribution Technologies for Small Commercial: Carrier Progress and Plans.” SMA is also introducing a research series with perspectives from the distributor viewpoint. A regular series of research reports will be published based on surveys and interviews of agencies, brokers, MGAs and others in the distribution channel, including insights from ReSource Pro’s large footprint of distribution clients. 

Straight-Through Processing in 2021

Straight-through processing (STP) is becoming more common in insurance underwriting and claims, especially in personal lines, individual life and small commercial. Adoption rates in more complex lines and in claims processes remain relatively low, so STP is by no means universal across the industry. However, it’s likely to remain a priority for insurers seeking to improve the ease of doing business for their distribution partners and create more convenient customer experiences for their policyholders.

Generally speaking, STP refers to the ability for insurer systems to automatically process transactions without manual intervention or input. The system ingests data digitally and completes the transaction based on decisions governed by algorithms, including predictive models and simple business rules. STP offers insurers benefits in speed, consistency, productivity and application throughput while making the customer experience quicker and more convenient.

Technological Factors

Technological improvements over the past two decades have been a major factor in the rise of STP. The most fundamental of these has been the internet, which has both enabled the connectivity underlying STP as well as shaped consumer expectations for user experience and speed.

More recently, modern insurance core systems with the ability to automatically adjudicate applications based on configured business rules, combined with modeling capabilities that can capture underwriting factors and predict outcomes, have made it possible to process applications without human oversight.

Insurers also now have access to a wealth of high-quality, third-party data, which can enable pre-fill, eliminate unnecessary questions or inform insurers of potential risk factors. AI and machine learning capabilities to refine algorithms and flag potential fraud have also contributed to insurers’ confidence in STP.

STP in Underwriting

STP in underwriting is most common in personal lines and individual life—lines that are under cost pressures and, increasingly, sold online. More than 80% of insurers selling these lines have at least some level of automated underwriting, and many personal lines insurers process straight through more than three-quarters of the time.

Large commercial and specialty lines typically don’t have high rates of STP, because these lines are generally sold through agents and brokers. Even where insurers have supported some level of automation (for example, via portals with rating components), most policies aren’t written straight through. Instead, insurers are focusing on distribution connectivity, which is itself a prerequisite for effective STP.

See also: The Digital Journey in Commercial Lines

Small commercial and workers’ compensation lines occupy a middle point. Many of these products still require manual underwriting, but they’re also seeing increasing direct sales activity, often directed at niche market segments. Carefully defining sales targets in this way allows insurers to facilitate STP for these lines, as they can design tailored products governed by specific business rules that rule out more complex risk scenarios.

STP in Claims and Digital Claims Payments

For most insurers, though, STP in claims is fairly uncommon. Nearly 60% of insurers have no STP in this area. On average, fewer than 10% of claims are processed straight through in any line. It’s most common in personal lines and (for payouts) in annuities.

Claims STP is likely to become more common, especially in personal lines and individual life, as insurers continue to improve their core system capabilities and as the availability and quality of third-party data improves. Where coverage limits are relatively low, insurers can increase their levels of automation to create faster and more convenient claims processes. 

Insurers have achieved more substantial automation in digital claims payments. A third to half of insurers process and deliver claims payments digitally (depending on the line of business), and 10% to 20% of insurers do so most of the time. Digital payments are likely to be a priority area for insurers. Since COVID-19 forced many insurers to send some workers into the office to print and mail checks, manual and paper processes of all kinds are under intense scrutiny.

The STP “Sweet Spot”

Generally, STP is most effective when four factors apply to a particular line of business or transaction:

  • Risks are well understood, which makes modeling easier
  • Data is easily accessible and generally reliable
  • Speed is at a premium to be competitive
  • Margins are thin, so productivity and throughput drive profitability

Figuring out where to enable STP isn’t always a question of looking at specific lines or products and determining whether these factors apply. Insurers can also use these principles to design new products, especially for direct distribution—for example, by defining the allowable risk profile for a particular product more narrowly so it’s limited to the cases that are most likely to be profitable.

The Future of STP

While the industry as a whole is trending toward greater automation, most insurance will never be completely straight through; there will always be some complex claims scenarios or unusual risks that will require human intervention and review. That itself is part of STP’s value, though: When technology handles the easy processes, humans have more capacity to focus on higher-value work.

See also: Insurance Outlook for 2021

Enabling STP has an upside for those human actors, as well. Investing in better data creates resources human underwriters can use, and better connectivity eases integration and improves ease of doing business for distribution partners.

Even just the process of implementing STP can have benefits. Creating the business rule framework or algorithm to adjudicate an application—or even figuring out if a particular process can be done straight through—requires insurers to examine their workflows, understand what really matters and justify what is done and why. That can lead to process and product improvements that wouldn’t have surfaced otherwise, as legacy mindsets can hide in all kinds of places.

For more on STP, please see Novarica’s recent report, Straight-Through Processing in Underwriting and Claims.

4 Connectivity Trends to Watch in 2021

A primary goal of insurtech is to simplify and automate the insurance lifecycle — reducing time-consuming manual tasks, improving the agent experience and addressing potential client risks. One of the best ways is to increase the free flow of information at all points in the distribution channel.

2020 was the catalyst for huge advances in connectivity, largely due to the shift to work-from-home. In 2021, four particular areas will experience accelerated growth:

Real automation of commercial submissions will arrive.

The process of quoting and binding commercial lines has a lot of catching up to do in terms of workflow efficiencies compared with personal lines. Commercial insurance continues to suffer from outdated manual data entry procedures and an abundance of unnecessary paperwork. One-to-one quoting with individual carriers is a labor-intensive process, and high-volume, low-revenue risks typically require the same amount of time and effort as larger, more profitable opportunities. 

But there’s good news on the horizon in 2021. This year, the industry can expect general availability of robust, comprehensive insurtech platforms that truly automate commercial submissions. These platforms speed up the process for both agents and clients by pulling end-insured information directly from the AMS and filling as much as 80% of most submission forms without a single click. In turn, these solutions deliver structured, more error-free data to the carrier for accurate, bindable quoting.

Commercial submission automation also allows agents to generate quotes from multiple carriers in near-real time. Consumers have long appreciated quote comparisons as a way to make more informed decisions. By bringing that capability to the commercial side, customers and agents can collaborate on coverage options and reach purchase decisions far more quickly.

Carriers will facilitate better data exchanges.

Look for carriers to expand their data sharing initiatives in 2021. With a more seamless connection among carrier, agency and insured, service will become more immediate, more personal and more competitive.

As connections go deeper into core business platforms, actionable insights grow. For example, if an end-insured makes a change in a policy (like adding a vehicle or a driver), an alert from the carrier could immediately be pushed to the AMS. This alert would not only offer the agent the opportunity to touch base with the customer, but it also eliminates the need for agents to reach out frequently to the carrier for updates.

Integration of third-party data will accelerate, as well, though the industry is in the early stages in the commercial space. The aim is for third-party data to facilitate collaboration across multiple activities such as identifying class codes and linking those to risk, streamlining the underwriting process and optimizing submission flows. The goal is to improve quoting speed and accuracy for commercial lines through third-party data integrations and, eventually, a single application programming interface (API), similar to what is already in place for personal lines.

See also: How COVID Alters Consumer Demands

Single sign-on will make carrier credentialing easier.

For independent agencies, usernames and passwords for carrier websites can be a major concern. The problem is evident when the number of employees is multiplied by the number of carriers; every username and password must be tracked and accounted for. 

When an employee leaves, credentials must be removed or changed — a time-consuming process that can also pose security risks if credentials are overlooked. Onboarding new employees requires provisioning dozens of credentials — also a time-consuming task. Over a year’s time, hundreds of hours can be wasted agency-wide simply due to carrier sign-ons.

Single sign-on (SSO) technology is beginning to solve the problem. SSO creates a single, secure agent identity that is acceptable to all carriers. Some AMS and rating systems already offer SSO, but, where the solution isn’t available in an existing platform, users can look to the non-profit organization ID Federation for an alternative. Expect to see SSO gain wider adoption in 2021 as it produces fewer username/password resets, reduces hassle for agents and increases operational efficiencies. 

We’ll see an improvement in straight-through processing.

Lastly, this year we expect the independent agency channel for both personal lines and commercial lines to see more functionality on straight-through processing with carrier partners. 

In other words, while we’ve been involved over the years with Rate Call 1 and Rate Call 2 (rating and quoting), some carriers are beginning to provide more functionality in their APIs to allow direct binding in the agency’s quoting applications. The benefit to the agency is a single workflow for rate-quote-bind. Carriers benefit from being seen as easy to do business with while providing a major competitive differentiator in the channel. This capability won’t be pervasive through the industry, but there appears to be more acceptance of the process from the carrier side than in the past. As a result, we hope we’ll see more carriers start to think about how they’re approaching this as a potential competitive advantage in the channel as well as the captive and direct markets.

The result: a better-connected insurance distribution channel.

SSO, automated commercial submissions, carrier data-sharing and better straight-through processing will be the most visible connectivity developments in 2021, but not the only ones. In a business defined by personal relationships, connecting well on a virtual basis will be more than a change — it will be a requirement for long-term success. And in a world where connectivity is constantly widening and deepening across industries, insurance workflows, both commercial and personal, have a major opportunity to benefit from modernization and in turn help carriers and agencies increase profitability and better serve their clients.

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.