This is one of a set of seven interconnected themes or forces that are expected to drive the traditional claims function into a new future of customer-centric, digitally-enabled, value-driven service and efficiency.

The insurance industry has a long history of success helping individuals, families and organizations protect their assets and interests — while also providing a reassuring level of certainty over what will happen if misfortune strikes and a claim takes place. New claims solutions is one of the seven forces that are transforming the claims function and is explored further in this article.

The claims process is the critical ‘moment of truth’ for client, who expect claims handlers to demonstrate empathy, precision and care on the way efficiently delivering a fair outcome. And while the claims function’s transactional nature hasn’t evolved much in recent decades, the landscape is shifting.

As new products and technologies emerge to meet a new era of client needs, risks and expectations, so must the services and value that claims teams can deliver. Forward-looking insurers are looking to transform how the claims function is positioned within an insurer, making it a strategic partner with the traditional ‘front office’ functions such as underwriting in a connected operating model. This will enable insurers to use the insight and experience of the claims function to enhance the client experience, and to prevent losses from occurring in the first place.

To bring claims into the digital age, today’s insurers need to identify the strategic investments that will enable future success. New claims solutions will broadly fit into one of three areas:

1. Connected operating model: the ability to price risk and handle claims effectively and efficiently for new risks and products.

2. Prevention and response: evolving the claims role to move beyond the traditional 'write a cheque' service.

3. Value-added services: delivering new services to clients, including the use of data, and relationships formed in the claims function, to create value.

Modern solutions for modern times — and risks

As risk pools change and technology drives product and service innovation, the claims function must also evolve to provide clients with modern solutions. New products will need to cover emerging risks and existing risks previously deemed uninsurable. New developments such as artificial intelligence, 3D printing, augmented and virtual reality, and cryptocurrencies, for example, are creating new risks that do not fit neatly into existing product categories and coverage offerings.

This article is featured in the Claims Transformation article series.

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In addition, the proliferation of connected devices and data from new sources means that currently niche parametric insurance products are becoming more prevalent, especially in general insurance (i.e. personal insurance). There will be fewer subjective interpretations of limited data as connected devices deliver more- complete datasets that support increased automation. Handlers will need to spend less time physically handling a claim and can increasingly turn their focus to data analysis and setting new rules for data management and claims processing.

The line between underwriting and claims will increasingly blur, demanding a more-flexible operating model and a break from traditional, functionally led structures to self-contained cells of expertise around risk for specific insurance types, such as motor vehicles. These cells will feature much closer collaboration and feedback loops between the core functions of sales and distribution, reserving, underwriting, policy servicing and claims — with a loop of timely information constantly feeding all areas and providing input from the whole value chain.

A new focus on prevention and response

The benefits of modern prevention and response solutions in reducing disruption among policyholders and lowering costs for insurers are clear enough. KPMG professionals estimate that claims can represent 70 percent or more of the cost base for an insurer1  and savings will enhance profitability.

Claims provide organizations with a wealth of data on several risks — from tangible to intangible. There is an opportunity today to analyze data more deeply and produce a more-dynamic view of current risk and how to minimize it. As insurers start focusing on prevention, the insurance model may shift from the traditional risk- transfer model to a mix of risk transfer and risk hedge, where policyholders weigh the claim risk amid the tighter focus on prevention. Given the expertise of the claims function, insurers could increase focus on prevention vs. only on handling, resulting in the need to change their organizational structure.

But challenges exist. In personal insurance, insurers have struggled to influence client behavior. In health insurance, organizations have made progress with connected-health devices and incentives, while for motor, household and travel insurance, any impact has been more elusive. This is potentially linked to the level of trust policyholders have in insurers, and the ‘grudge purchase’ challenge whereby clients limit their contact with insurance providers. To combat this, insurers must ask themselves:

  • How can we foster trust in the eyes of clients?
  • How can we offer meaningful, tailored insights to individuals to help manage their risk?
  • How can we incentivize clients to change behaviors and reduce risk?

Technology is helping insurers both to answer questions such as those noted regarding client trust, insights and behaviors, and to meet related challenges. The use of connected devices, to support prevention, is showing some indication of becoming more mainstream, but insurers are still navigating the landscape to understand how and if this fits their business model.

Today’s insurers also have an abundance of claims data to work with and enhancing their ability to compile and interpret data will unlock smart new insights for consumers regarding loss prevention.

Adding value by sharing insights

For many insurers the only touch point on the client journey is when they are interacting with their client who are making a claim. This light touch relationship means many insurers are competing on price for business and are increasingly seeing clients lapse on renewal to move to a competitor. Insurers are exploring ways to provide value-add services through the innovative use of data, insights and the claims experience to retain clients.

For example, a travel insurer could handle a client claim by booking a different holiday for the price of the claim amount, providing a convenient, value-adding service to the insured. Download our detailed “travel claim” journey below.

Evolved travel claim process

Take a strategic approach to evolving claims for a new era

Some insurers may choose to invest in claims and innovation to provide new solutions and services, offering longer-term sustainability and security. Others may focus on enhancing core activities within traditional claims functions to reduce costs and improve the client experience. Neither choice is right or wrong — but it will be critical for insurers to take a strategic approach.

  

  

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1 Estimate based on the experience of KPMG professionals.