Whilst 72% of insurance CEOs have an aggressive digital investment strategy, the primary focus has been on new product development and distribution, with claims very much secondary. As we approach the end of 2024, we’ve now reached the end of what we describe as claims transformation 1.0, where the majority of insurers can now support a digital claims submission (albeit simplistic and reverting to telephony very quickly) with some investing in more modern claims management systems to provide the foundation for supporting new product lines.
It seems appropriate therefore to pause and reflect on what we can expect from claims transformation 2.0. Which of the technologies that have emerged over the last 3 years and are now enterprise-ready will go from hype to application? And which disruptors did no one see coming?
In this article, we’ll look beyond the obvious (AI) and its application to automation and fraud to explore how wallet technology is becoming the channel no one foresaw, and one which is particularly well suited to insurers looking to leapfrog the world’s most trusted customer experience brands.
AI in claims
AI seems to be permeating through every industry in 2024 and the claims industry is no different. It is rapidly becoming one of the most disruptive technologies. However, its vast array of applications, the fear of it replacing the human touch for customers and concerns about regulatory compliance can leave insurers not knowing where to start.
Getting started with AI in claims
Surely then, an obvious place to start is by putting in place solid foundations for designing, building, managing and governing the use of AI solutions across the enterprise, from assessing risk to pricing and from claims to fraud. Mind Foundry provide both the AI platform and the consulting expertise to in-house teams wanting to build trustworthy and explainable AI, and include Aioi Nissay Dowa amongst their investors. Whilst such technology can help organise and enable good practice, deploying AI responsibly extends beyond the technology itself which is why we encourage adoption of initiatives such as Cert.ai (part of CertX and backed by Munich Re) to provide a structured and auditable way of evidencing AI compliance (think ISO27001 for AI) .
Where a governance foundation isn’t in place, it is even more important to leverage insurtechs that have developed guardrails for the responsible use of AI in claims operations.
It should come as no surprise that AI will be most advanced in those areas where its immediate predecessor (machine learning) has been in use for some time. This points to the widespread adoption of Document AI, with the added advantage that the classification, extraction and interpretation of unstructured documents and emails is both ubiquitous across insurers and their supply chain (e.g law firms, medico-legal providers etc) as well as being a back-office function where a human can review the AI results. Because of this continued dependency on humans, this technology wasn’t particularly disruptive in claims transformation 1.0, but more can be expected in 2.0 as the focus shifts to AI being able to compare claims circumstances against policy wordings and endorsements to determine whether the claim is covered or not and to what extent. This can be particularly challenging in say pet claims, where a presented invoice can relate to one or more pets, only one of which is covered by the insurer, or where a recent treatment has to be assessed as a continuation of a prior treatment or a new claim, and where many line items may be covered but not in full. Further disruption will occur by combining AI with non-AI services such as whether the vet practice extracted from on a presented invoice actually exists or not. We see one outcome from claims transformation 2.0 being a fully automated end-to-end process to prepare the claim to a claims handler, where the claims handler performs their initial (and only) review before approving or rejecting the claim.
Specialist AI applications
AI will also be disruptive in automating customer interactions. The negative connotation associated with ‘chatbots’ in claims transformation 1.0 will be replaced with the more positive experience from ‘conversational AI’ in 2.0. Unlike document AI, the use of customer-facing AI will likely be delayed for fear of falling foul of regulation. That would be a shame as it ignores where AI can safely be applied. Indeed one large motor TPA (3rd Party Administrator) has already automated 84% of the customer off-hire process and increased revenue by 25% by augmenting their use of Claim Technology’s customer self-serve technology with its plug-in to Open Dialog, a conversational AI modeller.
Other examples of AI technology that will be disruptive include the use of visual intelligence for both motor and home claims (BDEO and Solera’s Guided Image Capture are two of many such solutions available in Claim Technology’s insurtech marketplace). Whereas in claims transformation 1.0 the focus was on detection, the focus for 2.0 will be on accurately making AI decisions on triage or quantum. That unlocks the disruptive potential for resolving claims in seconds or minutes with zero-touch, particularly when combined with other AI services, such as fraud detection.
On a final note for AI, whereas decisions continued to be made in claims transformation 1.0 using a rules-based approach, we predict that disruption in 2025 will come from the use of AI such as Rainbird.ai to automate complex decisions in real-time in an explainable and trustworthy way. It wouldn’t be an understatement to suggest that the old rulebook/scoring matrix approach that has been held dear by all insurers should be scrapped – niche AI plays such as Clearspeed in the fraud space has usefully evidenced not only how ineffective those legacy processes are but how much insurers have been paying out in error.
Intuitive customer engagement solutions
We’ve seen above that AI has the potential to disrupt the claims back office in particular. But investing in many of the AI plays above can take a significant amount of time and money. Frameworks make the process easier, but all of this is still relatively new, complex and the professional skills to understand and leverage these technologies do not currently exist in-house.
This suggests that the most disruptive technologies in 2024/25 will be those that are customer-facing and those that adhere to that old adage, that the simplest ideas are often the best.
Wallet Technology
With the number of digital wallet users set to exceed 4.4 billion by 2025, wallet apps are the single biggest channel no one thought of. Already 34% of adults (rising to 64% for the 18-35 age category) are using wallet apps as a digital means of payment or for digital experiences such as scanning boarding passes or loyalty cards.
The partnership between Claim Technology and YourPass allows insurers to meet their customers where they are – on their mobile phones.
Offering customers the option to download a wallet pass enables every customer an easy way to know who they’re insured by, and with push notifications being enabled by default, it provides an excellent way for insurers to pro-actively engage with customers continuously (not just a digital way for customers to opt-in to renewing).
For those looking to push the boundaries of passes yet further, Claim Technology enables digital self-serve options to be added to passes, as well as a standard API pattern to push either policy or claim updates to passes in real-time with dynamic, hyper-personalised, contextual content.
In 2024 and 2025, passes will replace customer portals if not apps and with implementation times being in the order of weeks, and the cost being less than SMS, we see this mainstream customer technology being the most disruptive one of all.
