Digital, Fully Automated Claims Is Not A 2030 Dream – It's Possible Today

Jane Disney

With the cost of insurance claims raising year on year and consistently high loss and combined ratios, price competition, and threats from all sides against a backdrop of lower than ever consumer trust, the industry needs to change the game! Today we see a game of millimeters – where each tweak, innovation, or change impacts only by a millimeter or two, to one where the most enterprising among them can stride out and create a far greater distance from the challenges of today. But where to start ….

To date, claims optimization has been hailed as the savior; however the progress in this area would seem more perfunctory – appeasing stakeholders, tempting customers, and driving perceptions of innovation and leadership among peers. But the reality is not impressing consumers and not even scratching the surface of the cost challenge.

In 2016, a Which? survey found only 61% of home claimants from the top 23 UK insurers were satisfied with communication during a claims cycle – in other words, 39% were not satisfied. And, according to a study from Bain & Company, 80% of CEOs believe they are delivering a superior experience to their customers. The reality? Only eight percent of their customers agree!

A report from data and analytics firm GlobalData claims (no pun intended) that more than 30% of UK consumers stated they would purchase some form of insurance product from “alternative providers” such as tech giants like Google, Amazon, and Facebook. It is estimated that these ”alternative providers” could achieve a revenue increase of approximately £9 billion in gross written premiums, potentially causing widespread disruption across the industry should they decide to take on the traditional players.

A survey conducted by Altus, General Insurance (GI) Digital Experience 2018, shows the relative progress being made in the UK GI sector in digital capability. Outside of the top two or three insurers, there appears to be little progress to a truly joined capability across all insurance lines and in the end-to-end process – i.e., taking the process from front-end engagement through to back-end fulfillment.

So, that’s the problem outlined; let’s now look at what insurers can do today. There is a tendency to tinker around the edges with single-channel and line-of-business digital front-ends for First Notice of Loss (FNOL) only, perhaps with photo upload or video streaming capability. Or to spend huge amounts on multi-year core transformation programs that don’t deliver agility and innovation, but only introduce new legacy. Neither of these approaches is going to touch the sides of the cost and customer experience challenges.

As Forrester says:

“You can only put so much digital lipstick on the pig before you [have to] change your core operational processes …. Customer experiences aren’t confined to a small subset of systems. Even simple purchases need to reach back into fulfillment and billing systems.”

What insurers can do is deliver real innovation in self-service automated intelligent claims, giving the claimant unprecedented direct access to replacement goods providers, service providers, and repairers. Add to this the ability for the claimant, on any device, to report the claim, receive an immediate automated decision, and learn about replacement or repair options, with specially targeted offers to keep customers in contact with you – all in a retail-style experience. Click, click, choose, done – thank you very much. No interaction with a claims handler nor any need to phone a contact center to report the claim, to wait an indeterminate amount of time for a response or restitution, or enter a black hole in terms of the ensuing communication.

It is generally estimated within the industry that 60% to 70% of claims can be handled in a fully automated fashion and that this approach significantly increases the Net Promoter Score and customer satisfaction scores.

Such a retail-like experience for claimants will deliver significant benefits to both insurers and their policy-holder customers:

For policy-holders:

  • Simple, fast registration of a claim – from a mobile or any device
  • Self-management of the claims process
  • Selection of preferred replacement goods and/or suppliers
  • Organization of repair services
  • Special offers available through the insurer’s supply chain
  • Additional items, if required, based on special offers
  • An online, retail-like experience and building loyalty points
  • Relevant, targeted communications (and eliminiation of irrelevant ones)
  • Confidence and trust in their insurer to support them through difficult events

For insurers:

  • Differentiate their business from their competitors
  • Increase customer satisfaction and accelerate closure time for claims
  • Delight customers with offers and help them through life events and losses
  • Reduced costs through use of an approved supply chain
  • More robust processes to reduce claims leakage
  • Access to a supply chain to increase non-underwriting revenues
  • Stay in control – reduce the risk of supply chain issues
  • Client self-service that reduces calls to contact centers and the cost of claims
  • Claims handlers can focus on complex cases to drive better outcomes for all
  • An unrivaled customer engagement experience

This approach will deliver multi-layered business benefits for insurers, notwithstanding the benefits shown above:

Reduced costs: Reduced costs of administering claims can result in a four percent operational cost advantage (McKinsey); controlling spend via an approved supplier network can achieve a 33% lower cost of claims procurement (SAP benchmark) and a 70% reduction in Maverick spend. Other areas of claims leakage, such as uncollected excess payments, can be eliminated, given a robust and controlled end-to-end environment.

Given the hypothesis that 60%-70% of claims are straightforward and can be settled immediately, far fewer claims handlers and contact center operators will be required, leading to employment cost savings. There will also be lower back-office admin costs, a place where traditional claims processing and status updates can languish for long periods of time. In fact, one UK home insurance provider found that 70% of claims registered led to service inquiries, and the average time to complete a claim was 46 days. This is driving the company to implement a robust digital claims capability.

Increased revenues: Forrester research indicates that up-sell/cross-sell can account for 30% of total sales value, and upselling during the claims process could increase revenues by 10%-30% of claims value. McKinsey believes 30% of global revenues will be accounted for by ecosystems. Insurance companies should capitalize on their existing ecosystems to expose them to the customer base for enhanced revenues and customer engagement.

Customer experience: According to Bain and Co., 61% of UK policy-holders will switch insurers to find better “ecosystem” services (Customer: Behaviour and Loyalty in Insurance survey, 2017). They recommend exposing customers to the insurer’s supply chain to deliver significant, further benefits for the customer and the insurer. For example, Accenture found 41% of customers will pay more for better advice (Global Consumer Pulse survey). Insurers could break the cycle of new/renew/claim contact points and offer a better “lifestyle support” service for policyholders, bundling relevant, location-related, and timely solutions and services rather than individual product lines.

It’s funny how we don’t talk anymore …

… insurers don’t have to speak to customers to give excellent customer service.

In summary, insurers have the opportunity to engage customers more effectively in a robust and enterprise fashion, process claims more efficiently and at lower cost, deliver a retail-like self-service experience, increase customer loyalty and retention rates, increase revenues, and defy the “race to the bottom” which might otherwise be their fate.

Now that you know why you need to embrace digitalization, learn Five Ways To Become A Digital Insurance Company.


Jane Disney

About Jane Disney

Jane Disney is Industry Principal and Value Advisor at SAP. She has worked in the Financial Services sector for over 25 years and has significant experience across the banking and insurance industries. At SAP, Jane is responsible for strategy development, thought leadership, and executive-level demonstration of the value and innovation of SAP solutions that help drive digital transformation across the financial services sector.