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Macroeconomic shifts have reshaped the Australian insurance industry. The customer and employee mix is changing dramatically. Australia’s millennial generation is expected to grow by 17%, from 7.2 million in 2016 to 8.3 million by 2026, according to the Australian Bureau of Statistics. These digital natives will increasingly expect seamless, omnichannel, and real-time interactions and experiences.

At the same time, the region’s increasing climatic volatility and catastrophic patterns will pose tough challenges for insurers. Digital change, moreover, will continue to disrupt the traditional tenets of the insurance business. And with the rise of insurtechs and other new competitors, traditional Australian insurers must move quickly to innovate and differentiate. These changes mean that the insurance sector must come to terms with new risks, channels, customers and competition.

Digital advances and powerful new computing technology will enable carriers to redefine claims turnaround and accuracy. The winners will embrace this change, shifting traditional claims operating models to tech-infused activities. Here we explore potential end states for the claims function and prioritise areas of opportunity. For additional detail see our white paper, “Engineering the Next-Gen Digital Claims Organisation for Australian General Insurers.”

Key value gateways to next-gen claims

The coming world of claims will be different for customers, claims personnel and network providers. Australian insurers have traditionally faced a dilemma between maximising customer experience or claims: carriers that focused on customer experience typically incurred higher expenses, while those focusing on claims saved money but were more likely to see customer dissatisfaction.

Carriers have already moved the needle on their core claims platforms, modernising them to simultaneously enable better experience and operational efficiencies. Tomorrow’s winners will be those that overlay their modernised claims platform with digital propositions that deliver greater outcomes of experience, effectiveness and efficiencies. Reaching the claims North Star requires broader thinking and change across all layers of the claims landscape: experience, supply chain, process/operations and people. The following figure depicts the five key gateways along these business dimensions and the bold moves that insurers must undertake.

Figure 1 Five key gateways to next-gen claims

Next-gen claims experience

To succeed today and tomorrow, insurers must view the claims journey end-to-end. Additionally, new personas are taking shape with the entry of millennials into the marketplace. Insurers should study these personas and build holistic capabilities that deliver experience goals pertinent to each. Key differentiating experience principles include the following:

  • Transparency: Be transparent in terms of information, time required and other aspects of the claims process.
  • Proactivity: Anticipate communication requirements and touchpoints (such as early notifications on repair delays).
  • Simplicity: Ensure simplified information dissemination, and deliver that information at the proper moment.
  • Speed: Ensure the shortest possible time from entry to completion.
  • Personalization: Enable a flexible experience with a high degree of individualization.
  • Omnichannel: Enable seamless customer movement across channels of the customer’s choice.
  • Humane: Acknowledge the physiographic side of the experience.

Supply chain ecosystem orchestration

A large portion of loss adjustment expense is spent managing supply chain partners. These partners include outsourced call centre support, legal solicitors, collision vendors, glass repairers, salvage providers, restoration services and emergency services. Insurers need to maximise the value they receive from their supply chain by centralising management of lead time, customer satisfaction, indemnity performance commitments, workload allocation and costs incurred across vendors.

A gradual shift in the ecosystem is also occurring as manufacturers and ecosystem players look to bundle risk management into their offerings. Australian insurers must rethink their role and look to create new sources of value. Their goal should be to be the key player and influencer in this ecosystem. By positioning themselves as orchestrators, carriers can acquire data from the ecosystem, use it to deepen risk insights, and then facilitate downstream services with partners.

To ensure efficient supply chain orchestration across indemnification and risk management services, carriers need to digitally integrate with different players, seamlessly connecting communication and workflow across the ecosystem. Cloud-based data platforms and cognitive solutions form the core of the orchestration layer, continuously monitoring risks, detecting potential losses early, and triggering best-fit services.

Claims process industrialization

Middle- and back-office processes are traditionally complex and lengthy, with many manual tasks. The advent of digital technologies and AI, coupled with the rise of insurtech solutions, provides carriers an opportunity to industrialise more claims end-to-end. Key examples include:

  • Artificial intelligence (AI) solutions that automate case assignment, straight-through processing of simplex claims, and verification of invoices, estimates and payments.
  • Blockchain- and smart contract-based processing and automation of claims.
  • Digital solutions such as live collaboration tools enabling remote adjudication; drones for remote assessment; and AR/VR for remote loss/accident simulations.

In the new claims ecosystem, data from native sensors, cameras and telematics devices will provide automated data access. Automated first notice of loss (FNOL) can follow up with enriched facts about accidents. Moreover, with the right computing tools, insurers can further enable automated liability determination, damage assessments and settlements for a large share of claims.

Claims process intelligence

Despite modernization, some claims will continue to require manual oversight. AI-based case management algorithms can help segment cases by complexity using factual and predictive claims characteristics. Based on this segmentation, claims can be assigned to either automated workflows or a claims handler. The ability to make correct, fast decisions at scale is crucial. Tools towards this end include:

  • Natural language processing technologies, enabling faster analysis, including medical record summarization for injury claims, processing of damage images, and real-time invoice analysis.
  • AI-laden dashboards to rapidly diagnose claim outcomes.
  • Machine learning models that facilitate decisions by detecting fraud patterns, running complex claims simulations, and analysing recovery potential.

New-age claims operating model

As insurers reinvent the claims journey, they must also realign the claims operating model. The claims department must develop a “phygital” talent pyramid, blending human and cyber capabilities to grow the business with a substantially lower cost curve. This involves newer roles for existing claim adjustors. Key functional areas include:

  • Data scientists, working on factoring experience into the machine learning models that power claims processes.
    Product owners of digital solutions embedded in the claims value chain.
  • Risk management experts, monitoring the risk ecosystem of insureds and orchestrating loss prevention services.
  • Complex claims handlers, handling legal and long-tail liability claims.
  • User experience designers, working with customer feedback to improve the customer journey.

Looking ahead

The next wave of digital change will bring the claims organisation to a crossroads faster than previously thought possible. To ensure competitiveness, insurers should look to:

  • Lead with the customer by fine-tuning their user personas and understanding the claims journey.
  • Identify gain creators and pain relievers across the journey aspects and define customer value propositions.
  • Align these value propositions to their future vision in terms of business models and products.
  • Define user journeys of the claims workforce and processing teams across the value chain.
  • Unearth downstream claims process improvements and automation opportunities aligned to the value propositions of both customers and internal teams.
  • Understand data and analytics needs in delivering the value propositions of the customer and internal claims staff, identify available third-party data sources, and define opportunities.
  • Understand off-the-shelf solutions and identify potential partners.
  • Define short- and long-range goals for the claims organisation across the operating model; bundle targeted initiatives aligned with strategic goals; and develop a robust business case.

The case for change is real for insurers. Those that leapfrog the competition by investing in digital propositions across experience, supply chain partners, process and people will stand apart from the competition.

To learn more, read our white paper “Engineering the Next-Gen Digital Claims Organisation for Australian General Insurers,”.

Vinodh Stanley Stephen

Head of ANZ Insurance Consulting, Cognizant

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