In previous discussions,¹ we delved into the phenomenon of social inflation and its repercussions on the insurance landscape. The industry continues to grapple with escalating trends in claim settlements and verdicts, compounded by the surge in healthcare expenses associated with injury treatments—spanning rising pharmaceutical costs, advancements in medical technology, and increased labor wages.

These developments extend beyond mere statistical concerns, influencing underwriting practices through enhanced risk selection standards and impacting claims management as professionals navigate the complexities of assessing damages and liability amidst growing loss trends.

At the same time, while the drive to improve underwriting standards, limit loss ratios, and contain costs remains relentless, the need to invest longer term in technology has never been greater.

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Harnessing Technology for Enhanced Claims Processing

The narrative around InsurTech companies, particularly those that have entered the public domain over the past decade, often heralds the dawn of a new era in insurance technology (see the so-called ‘first wave, or InsurTech 1.0).² 

Yet, it is the consistent and significant investments by carriers in technological advancements that underscore a commitment to innovation. From a spending benchmark of $19.3 billion in 2018, projections indicate an ascent to $33.1 billion by 2026, even as the industry contends with persistent profitability challenges.³ 

These investments are broad and multifaceted, encompassing core system upgrades specific to individual carriers, sweeping modernization efforts, and the adoption of cloud-based analytics and data processing tools. Recent forays into machine learning (ML), large language models (LLM), and artificial intelligence (AI) signify a pivotal shift towards reimagining the customer experience and fortifying cybersecurity measures.

Specifically for claims, the value of technology integration is more apparent in the case of automation of back-office processes, reduction of duplicative activities, and redesign of processes. Initial use cases look promising, although the impact of integration of more advanced technologies has not yet largely been explored.

Operational Efficiency: Automation of claims helps with handling high-volume, low-value claims in commercial lines, such as workers’ compensation or general liability, in case of repetitive tasks and managing documentation.

Customer Experience: Speed of settlement and transparency in the overall claims process are important factors in the customer experience, which is a driver for 87% of policyholders when deciding whether to remain with their carrier.⁴ By automating communication and documentation, carriers can not only speed up the claims process but also improve claimant satisfaction.

Pattern Detection with Advanced Analytics: Advanced analytics tools are crucial in analyzing complex liability claims. For instance, in professional liability claims, data analysis can track patterns in claim frequencies related to specific professions or incidents. In commercial lines, analytics can evaluate large volumes of data to identify trends in business interruption claims or liability risks in different industries.

Fraud Detection and Regulatory Compliance: Machine learning and AI’s role in detecting fraud and ensuring compliance represents a key opportunity for the insurance industry. Language models that are commercially available or proprietary from carriers can be used to analyze vast amounts of data and detect patterns and inconsistencies that are often associated with fraud.

Regulatory Compliance: Compliance checks can be automated in complex liability claims where regulatory requirements are stringent, ensuring adherence to legal standards in claims like professional indemnity or directors’ and officers’ liability.

Real-World Integration: A Step-by-Step Strategy

The journey towards integrating advanced technologies into claims management requires a strategic and phased approach. Success often begins on a small scale, addressing critical business challenges through targeted use cases before expanding the scope of technology integration across broader organizational processes.

This roadmap to the implementation of more complex technologies requires a commitment to robust data management policies and comprehensive personnel training.

In our experience, success starts small, with specific use cases, addressing the most pressing business problems first. Gradually, this technology can be integrated into broader workflows and platforms, always keeping in mind the need for robust data policies and personnel training.

In conclusion, as we navigate the complexities of today’s insurance market, the strategic integration of advanced technologies in claims management is not just an option—it’s an imperative. By embracing this journey, we can unlock unprecedented efficiencies and redefine what is possible in casualty insurance.

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¹ Alan Gray – Impact of Social Inflation and Mitigation Strategies, 2024

² NTT Data – Navigating the Evolution: A Reflection on Insurtech Journey, 2024

³ Insider Intelligence – US P&C Insurance Technology Spend Forecast 2022

⁴ EY – Claims in a Digital Era: Data, Analytics and AI Transform the Customer Experience