All aspects of the general insurance industry are expected to be transformed over the next few years – but perhaps none more so than claims.
A new report from Ernst & Young (EY) details just how much change we can expect, and what form it will take.
Based on interviews with insurance executives, analysts and fintech leaders from Australia, North America, Europe and Asia, the conclusion is simple: almost every link in the claims process will be fundamentally altered.
Decreasing claims volumes will continue in many lines of business, particularly in motor.
Claims frequency and severity have been dropping for years due to better roads, improved vehicle safety and driver training. Throw driver assistance technology and automated vehicles into the mix, and we can expect even more rapid falls.
Outside motor, sensors for monitoring homes and businesses are also proving useful in claims prevention, and connected home sensor technology can also provide effective monitoring of incidents such as fire and flooding.
Large businesses will have vastly improved risk management capabilities, while better data on claims and the cost of risks will push down claims volumes from large commercial policyholders.
“However, despite the long-term downward trend, there will be increased volatility, with a likely increase in severity of claims across a range of products driven by different factors,” the report warns.
Increased frequency of weather-related events means significant flooding is likely to continue being a major issue.
“Claims operations will need flexibility to scale up quickly to meet demand spikes and handle these effectively. However, today there often aren’t enough assessors, adjusters and third-party suppliers in place to meet demand within proximity of the events.”
Better technology can also provide advanced warning of such events – saving lives, protecting property and reducing the risk and severity of business interruption.
Digital disruption will continue to have a major impact on claims, with consumer expectations being defined outside the insurance industry. Self-service will become the norm and “omni-channel capabilities” will be needed.
“Customers increasingly will be willing and able to handle less complex claims entirely through digital channels,” the report says.
Technology will allow simple claims to be settled automatically if they fall below a certain financial threshold and no fraud indicators are present.
So what will the claims organisation of the future look like?
EY says there is “no doubt” it will be far leaner, with a smaller workforce. “Retail and personal insurers may reduce their employee base by up to 50%, with commercial specialty insurers seeing smaller reductions.”
Claims companies will need a number of capabilities, including:
- Robust digital channels to handle most low-complexity claims
- Automated, rules-based processes to replace human handling in less complex tasks
- Fewer low-skilled claims handlers, with greater focus on complex adjusting skills
- Increased outsourcing and offshoring due to continued cost pressures.
Claims professionals of the future will need a different set of skills, and will be more experienced and specialised.
Analytical skills will be in higher demand and remote working will increase.
“The long-standing talent shortage in claims will be alleviated to some extent by increased automation and changing skill requirements,” the report says.
The way forward for claims organisations is clear.
They must be leaner, highly skilled, data-driven and with a relentless focus on delivering a smooth experience for customers.
The implications for established insurers and claims organisations are obvious. They are going to have to rise to the challenge, or new entrants will stake their claim in this rapidly changing landscape.