Many insurers are on the path to digitisation and automated claims processing. Whether it’s digitising the first notification of loss, or full straight-through processing of claim outcomes, the benefits are clear. A reduction in claim handling costs leads to greater customer choice and faster claim settlement times. This in turn leads to better margins and happier customers.
But automated claims processing has its pitfalls, and it has exposed significant issues with back-office practices, customer expectations, and regulatory considerations over the use of data. We examine some of the common issues and explain the steps you can take to help mitigate these.
Effective processes and infrastructure
A slick claims automation solution can be a game-changer, but it must be supported by a robust underlying infrastructure and streamlined processes, or the benefits will be lost. This is to ensure a good customer experience and consistency across all your channels. Customers often start with the digital channel and end up making contact over the phone, so a seamless experience across the two is essential.
Are service level agreements aligned to customer demand?
Customers may expect a quicker response to claims notified online than they would for a phone-based notification. While an immediate meaningful human response may not be possible, automated updates can ensure customers know what will happen and when which should avoid unnecessary telephone calls to the claims team.
Is data capture consistent across each channel?
Online claim notification provides insurers with an opportunity to capture richer data, which can help inform underwriting and claim decisions. However, if this data isn't aligned with data captured through traditional channels, it may not be fit for purpose. You must ensure that information gathered across all your channels is consistent, meaningful, necessary, and meets General Data Protection Regulation (GDPR) requirements.
Do claims teams have visibility of claims that are started online?
As a customer, there’s nothing more frustrating than having to repeat information to multiple people. It’s vital that claims teams have immediate access to all data captured online so they can assist customers who need to speak to a human being and step out of the digital journey. This data can also help your claims team quickly get to the right outcome.
Do all channels reach the same claims decision?
Any claim should result in the same outcome, regardless of the channel a customer chooses to use. As such, it’s important to evaluate the underlying systems and procedures to enable fast, efficient, and standardised claims methodologies. This will ensure fair treatment of customers and encourage good outcomes under new Consumer Duty regulations. It will also help to simplify back-office processes and provide concise management information to support decision-making.
Customer expectation and product alignment
Sometimes customers aren’t happy with the outcome, which can easily undo the benefit of automated claims processing.
In one example we’ve seen, an insurer was looking to start their claim-automation journey with a proof of concept for the larger change programme. They wanted to start simple, by automating a small number of claim payments for a specific type of claim. The peril they chose for their proof of concept consisted of low-value and low-risk claims, the payment parameters were relatively simple (the customer received a fixed benefit payment in the event of a claim) and the claim volumes were relatively low. It seemed like the perfect choice.
While the automation rules worked exactly as expected (claims were paid immediately in line with policy cover), customers weren't happy. Customers didn’t want a benefit payment; they wanted the insurer to pay the out-of-pocket expenses that were incurred as a result of the claim event. In fact, almost all customers whose claims were automatically paid contacted the insurer to query or complain about the decision. Any efficiency savings were immediately wiped out by the extra administration costs needed to resolve the issues and manage dissatisfied customers.
These problems weren't unique to automated claims processing; it turned out that the help desk often had to deal with unhappy or confused customers who had called to make similar claims. The issue was that the policy cover did not meet the expectations and, without a human being to carefully explain the decision, the automated solution simply magnified the problem.
So how can these issues be mitigated? While sweeping changes to policy cover may not be easy (changes may put products out of step with the market, potentially impacting Defaqto ratings or rankings on price comparison sites), it does present opportunities to innovate. At the very least, insurers should identify key issues with policy and consider taking such claims out of the automated journey if the outcomes are detrimental to customer experience. Signposting before and during the digital journey can help to better set customer expectations, and such issues can help better inform future policy wording & sales processes.
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Claims automation has also highlighted another problem relating to insurance products – complexity.
Complex policy exclusions, limitations and small print can all make it difficult to automate claim outcomes as they need additional information to verify. Either the customer must undertake an onerous data-gathering exercise or you must obtain information from external sources, which can be expensive.
This can significantly restrict the number of claims that can be automated and makes the case for investment in digital solutions much harder to justify.
Some insurers are taking steps to address this by simplifying their policy terms and conditions:
- Perils that are underutilised or don’t meet customer needs can be removed – not only can this help with the digital claims journey, but it also meets the growing customer demand for simple and transparent products
- As products have developed over time, so have the complexity of policy exclusions Simplification or removal of exclusions can simplify online journeys, but it’s important that this is done using robust and accurate claim data so as not to expose insurers to the risk of unexpected increases in indemnity spend
- If there are opportunities to refresh policy terms and conditions, or when looking to create brand new products, having the digital claims team involved at the product design stage can better align automated digital claim outcomes with policy cover
When developing your claims process automation, starting simple will help to minimise the risk and reduce the cost. You can expand the rules and introduce new sources of data. This approach introduces benefits with minimal spending, and it also gives insurers great insight into the data captured, which can help inform future development roadmaps.
Understanding customer demand
The customer is an often-overlooked feature of automated claims processing, and it’s important to consider their digital journey. It’s easy to get carried away with investing in new digital claim technologies, without considering the changing demands of customers.
Design digital claims processing with the customer in mind
It may sound obvious, but there are many examples of online journeys that are designed on top of underlying systems rather than by understanding the needs of the customer. From the capture of unnecessary information to the flow of questions, onerous claims processes are often simply replicated online leading to high fall-out rates or low uptake rates. Developing digital journeys from the ground up, rather than fitting around existing systems and processes, can help ensure the digital claim journey is as pain-free as possible for your customers.
Digital channels can help significantly reduce the cost to manage a claim, but for insurers experimenting with digital-only products, it’s important to consider the wide variety of circumstances customers find themselves in, and the need to talk to a human being if something doesn’t fit the norm. Customers should have clear routes to do this, and where there may be multiple channels available to claim, customers should know what choices they have.
Give customers accurate and proactive advice about claim processes
Good communication with customers who make a digital claim is key. Your customers need to know what will happen and when it will happen. Any uncertainty will undoubtedly result in unnecessary customer demand and a reduction in the benefit of automated claims processing for the insurer. Digitisation gives insurers the opportunity to provide the customer with automated updates at regular intervals, or at key moments in the claim lifecycle.
Regulation and the use of data for automated processing
Regulation, particularly GDPR, can make it difficult to use certain types of data for automated claims processing. This can be especially true for special category data, or data relating to third parties.
While this doesn’t necessarily put the brakes on an insurer’s digital aspiration, it is important to understand:
- What data can and can’t be processed automatically
- How to inform customers of any automated processing that may be taking place
- How they should have the right to review or opt out of any automated decisions
You should consider these points early in the development of automated claims solutions and include robust data protection impact assessment processes. This will avoid any nasty surprises later in the development cycle and help develop a solution that is fit for purpose and meets your customer expectations.
Many customers are wary of insurers, especially at the point of claim, with a belief that the claims process will be long, drawn out, and result in an unfavourable outcome. Claims-process automation gives insurers the opportunity to overturn these expectations, delighting customers with a fast, accurate claim settlement.
By ensuring a holistic approach to automated claims processing, you will be able to maximise opportunities to add value to customers, operate efficiently and develop new and innovative products and services.