More often than not, it will be a claims process that most defines the customer experience and whether to buy or stay with one insurer or intermediary over another. The InsurTech player in the insurance claims value chain should aim to excel at claims, exceed expectations, and delight customers. This chapter proposes an Action List for InsurTech in Claims, and focuses on:

• private motor/auto
• personal effects
• owner/occupier private dwellings.

For context, the focus is generally accepted practice, without a particular focus on laws or regulations.

The following are common elements of the claims process:

1. Incident occurs
2. Incident notified, recorded, and acknowledged
3. Claim validated
4. Repair, replace, or pay
5. Final settlement
6. Subrogation, recovery, or third-party aspects.

It is important to distinguish first party from third party as a claim: the first party is the (named) insured, and the third party is anyone else who may be entitled to or otherwise seeks redress from the insured party. If an insured driver impacts another vehicle and is at fault, then the insurance policy should indemnify the policy-holder against claim(s) from the third party where fault is established with the first party. This chapter does not delve into areas of third-party liability, contribution, or subrogation. In fulfilling the claims promise, the following most basic rules contribute to the customer experience:

1. Ease and availability to report a loss
2. Communication, communication, communication
3. Meticulous record keeping
4. Managing expectations (see 2. above)
5. Efficient management of external suppliers
6. Time/speed to settle.

Where do InsurTechs wish to sit in the overall value chain? Some may simply want to sell somebody else’s product and move on, equivalent to box shifting as seen in price-comparison space. InsurTech firms selling insurance products underwritten by an insurer, reinsurer, or Lloyd’s underwriter will need to establish (a) which party will be managing claims and (b) which suppliers could be involved. For an InsurTech, managing the whole claims process is unlikely but there are many opportunities to introduce platform offerings that simplify, accelerate, and optimize the claims handling process.

Claims also have a tendency to occur at inconvenient times. Similarly, many claims can come all at once, something the insurance industry refers to as a surge. So, careful orchestration, planning, and processing with respect to claims must not be left to chance. Similarly, it is inevitable that not every claim will have a 100% satisfactory outcome for a policy-holder so it is important to have superior complaints handling processes. Complaints processes may often be a key component of regulatory applications and subject to ongoing supervision. Thus, a documented process/procedure that includes robust record keeping is required.

The Supplier Landscape

Sometimes claims handling is best done by the underwriters of the actual policies. This means claims control will largely be in the hands of other party(s). Insurers commonly outsource claims, involving a specialist third-party administrator (TPAs or claims management firms). Many of these companies operate a full suite of services with authority to settle claims without reference to the principal company (called “delegated authority”). They are paid a fee and provided with cash funds to pay claims directly, often up to a certain limit. Similarly, many law firms have administration units to process claims, usually specializing in injury and liability matters. While securing underwriting capacity and products is a key objective of many InsurTechs, this claims supplier landscape is important.

If controlling claims is desired and the indemnity provider is satisfied that an InsurTech is well positioned to administrate claims and grants settlement authority, then one must assess how much of the process one can manage and consider whether to build, or buy, a claims management platform. It is a “buyer’s market”, so in evaluating options, be sure to understand the scope of services available, how these are delivered, and differentiators in terms of value-added services. Then there is the issue of pricing and who picks up the costs.

After considering all of these factors, should it be determined that your InsurTech business could embrace claims or, better still, make claims a key differentiator for competitive advantage, then there is a broad and rich stream of opportunities to improve the value chain. And a multitude of options to introduce incremental improvements within established enterprises.

CX in claims

The Customer eXperience in claims remains broadly operated by telephone and form filling, either paper or digitized. Firms are expanding capabilities to add mobile and other channels, increasing the options on how customers choose to initiate a claim or handle correspondence, validation, and so forth. Lightweight, mobile-first, responsive design is key. If regular interaction and customer engagement with an insurance product app forms a key part of the business objectives, then adding efficient claims reporting and processing tools to the menu makes sense. Many companies still require policy-holders to download, print, and submit a form, perhaps reflecting the disconnect between back-end policy, claims, and customer platforms, respectively.

Analytics in Claims

The spreadsheet is still perhaps the most widely employed tool in the claims manager’s toolbox, possibly supported by some additional management information tools. Aggregating structured and unstructured data alongside multi-channel capabilities capturing client communications, artefacts, and data is where InsurTech has potential to move the needle. Incumbent firms have vast silos of claims data in many forms (usually archive boxes!). Demarcation between personally identifiable information, when all information that could be used, directly or indirectly, to identify an individual is an obvious necessity. Everything else, ingested into modern and capital efficient platforms, introduces the ability to move the claims paradigm from the realms of hindsight and insight to foresight. In some cases, claims might even be automatically validated and settled. In other cases, forecasting on time to settle, cost to settle, and deaccessioning on complex liability based on historical claims experience or propensity can be achieved.

Robotics … Arise the Claim Machines

Software and machines, chatbots, and robo-advisors are now being programmed to learn through conversational experience with humans. Natural language processing, the ability to command and control processes with one’s voice and get answers, are now becoming commonplace. Chatbots have the advantage of capturing routine data more efficiently than humans and triggering automated processes that are resource consumptive if done manually.

Many claims processes are routine, so well-refined processes developed by humans can be successfully completed through robotic automation. The most obvious example is in the routine of First Notification of Loss (FNoL), the Q&A between insurer or broker and policy-holder when a claim is discovered and onboarded. The what, where, why, and how (much) can be captured and input to core systems and related incident response teams where required. Capturing and analysing in this manner builds data continuously and is scalable to meet the demands of the largest enterprise.

IoT Applications in Claims

With the washing machine or refrigerator becoming “smart” and the likelihood that anything that can be connected will be connected, IoT will also find applications in the claims process. Connected cars can notify of adverse events via wireless networks; sensors in the home, factory, and farm field can instantly raise an alarm that may indicate (or evidence) a claim admissible under a policy of insurance. In fact, centrally monitored security and fire detection was introduced decades ago, and many insurance policies contain warranties to this day that stipulate the usage and maintenance of such devices to mitigate risk. Plant and machinery breakdowns, and indeed their consequences, often become claims in commercial insurance. The speed of containment of a claim can mitigate the consequences for policy-holder and insurer. Wind turbines and photovoltaic solar panels, both domestic and commercial, not only need repair or replacement when damaged but may also cause financial losses and both may be recoverable. If adverse weather, hail or storm conditions, for example, were to be forecast, preventative measures could lessen or eliminate the risk of damage.

Digital Evidence and Thwarting Claims Fraud

How InsurTech firms maintain digital records with respect to client interaction is an area that needs careful consideration. The UK Insurance Act (which came into force in August 2016) and other EU Directives, including the General Data Protection Regulation, present challenges for the industry as a whole. The concept of “treating the customer fairly” shifts the burden of proof and reliance on insurance contract language when dealing with claims. When dealing with multi-channel communications, how and what information is exchanged in the process of a claim must be captured and retained to whatever extent may be required for class and jurisdiction of business, which can vary considerably. Conversely, industry supervisors may need to see evidence that fraud is being routinely and robustly monitored. This is not an optional item that a regulated firm can decide upon. It is usually mandatory because, in the eyes of the regulators, fraud is a threat to other policy-holders and the broader financial system. Accordingly, anyone involved in handling claims will need to demonstrate and may become reliant on methods employed to counteract fraudulent activity.

Fraud detection is not merely a claims matter, but part of broader fraud prevention. It is also applicable at point of sale, where information is obtained from the policy-holder during the proposal and underwriting stage. The use of technology and data in the fight against insurance fraud is not new. However, new techniques like behavioural analytics that operate in real-time are more advanced. Many platforms now interrogate social media and find patterns that claim investigators would struggle to identify. Video analytics and voice stress analytics are being combined and trialled by US and Canadian immigration at the time of writing. A platform developed by the University of Arizona, called AVATAR, (Automated Virtual Agent for Truth Assessments in Real Time) offers a glimpse of what is happening presently. It is multilingual too! InsurTech firms should liaise closely with insurance partners and experts to develop strategies and procedures to detect and tackle fraud. Many are well resourced in this area and have a common interest in mitigating fraud risk.