Whilst the pandemic may have accelerated a purported need to ‘go digital’ insurers have been investigating its benefits for some time. There’s no denying that a digital claims process would be more efficient, both for the customer and the insurer. It would be more sustainable as quite simply the fewer the physical customer contact points the less carbon footprint there will be.
But the investment to provide a fully digitised process is huge and the question is whether it is worth the payback? ABI data suggests that only 10% to 15% of customers ever make a claim. In motor, those who do claim only do once every seven to nine years, so with that in mind what is the justification for a digital system which customers will use infrequently (if at all) and only for a short period of time?
According to industry chat, most insurers think their peers are going ‘fully digital’ but we’re yet to see the evidence for that at Procurato, it’s a false consensus. We have seen some reactive solutions such as e-forms or post-FNOL text message updates but nothing in terms of a fully digitised end-to-end process, which begs the question…
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Do insurers need to go digital for claims?
Banks have for years invested heavily in digital banking and payments and consumer adoption is high (despite the detriment to the high street branch.) But banking is an everyday activity – insurance isn’t. It’s a once-a-year policy renewal and an infrequent claim. Yet customers are demanding digital solutions, should you be listening to them?
Or maybe it’s nothing to do with the customer at all. Maybe digitising the claims process using machine learning and AI provides granular risk pricing that provides a financial competitive advantage and that is more important.
Too often the digital driver is cost reduction or solving the sins of the past such as too many legacy systems, poor organisational process, or poor management of indemnity rather than genuinely meeting customer expectations.
Analysis and insight from Altus indicates that digital capability in both property and motor is increasing with 96% of insurers providing a fully digital option for quotes, up to 50% for renewals and up to 60% for other customer interaction. In fact, the only part of the insurance cycle that isn’t digital is claims with just 31% of insurers offering claims digitally for home insurance and an incredibly low 21% for motor.
But regardless of the reasoning if you don’t do something, you will be left behind and someone will forge ahead.
The drivers for a fully digitised claims process
There are several good reasons why insurers should consider bringing claims into their digital strategy.
A primary driver must be that the online system is easy for customers and claims handlers to use. Bringing in a self-serve option can help release resource on claims teams allowing employees to focus on high cost and higher demand claims.
But which option should you go for? Flexibility has shown to be crucial for customers:
Let me do it myself (full self-service); they want a service which allows them to have 100% contact online.
Do it with me (hybrid claims: self-service but with some support at, for example, FNOL or when I have a problem); or
Do it for me (conventional claims service, but usually with a digital “update me” offering).
Our insight suggests that most consumers are looking for that hybrid claims service model, but always with the option to switch between approaches.
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Giving customers access to the status of their claim via an app or online will significantly reduce failure demand from chaser calls and requests for updates. This ease of access will also lead to improved customer satisfaction (assuming the online solution is fit for purpose!)
This beneficial impact doubles when you bring the supply chain on the digital journey. Claims handlers can check progress through a portal saving the time and effort of constant calls and it provides insurers with essential insight into supplier performance.
Digital claims allow insurers to be more consistent in how they take claims forward and which route (e.g. cash out, conventionally handle, negotiate, litigate they use to drive claims down).
Digital claims capability can also be used to improve the indemnity control through more consistent settlement via automated valuation. It can also provide insight into handler and supplier performance and decision-making, so you get to know who your best negotiators are, which solicitors are delivering the best outcomes and what average settlements in different scenarios are – amongst many other things.
Creating the templates and schemas which are needed for digital claims improves the quality of data capture (because the data is forced into more rigid formats). This offers enhanced MI and insight as a by-product of digitisation.
Although companies are encouraging their people to go back to the office, the reality is flexible, home-working is here to stay for the foreseeable future – primarily because employees are demanding it as a part of the employee value proposition – if they don’t get it, they will head elsewhere. Insurers need to ensure that the technology for employees dealing with claims from their lounge offers the same as those in a full call centre.
Surge and Operational Experience
We know from the recent storms just how much of a problem a surge in claims is. You may not have the resource to deal with exceptional numbers and that will have a huge impact on customer service at the time they need you most. A digital claims experience allowing them to get direct and transparent access is invaluable.
A strategic procurement perspective
Our view at Procurato is that insurers will need to create a digital claims process but to what extent will vary. Start by asking the following questions:
• What is the problem you are trying to solve? Think strategically, this isn’t about what you think you need to do, or what your competitors are doing.
• Once that problem has been identified would that mean an end-to-end digital journey for the customer or would a simple solution for individual touch points such as an e-FNOL or chat bot make a positive impact with minimum investment? Maybe it’s more to do with your back office.
• If the problem is relating to cost savings, what length of time are you willing to wait to recoup the investment needed?
• And, who will you partner with to achieve your objectives? The decisions are as much procurement ones as they are strategy ones – partnering with the right supplier to get a future-proofed solution is critical.
However, here is a final word of caution. Our experience, having been involved in several Digital Claims programmes, is that insurers should talk to customers about what they want and will use before they design the solution. Focus groups, interviews, prototype feedback sessions, and research into complaints are all essential to inform the strategy about what customers expect. Most of the failures in take-up we’ve seen have been because the solution didn’t quite fit the requirement and led to customers picking up the phone.
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The Procurato Way
Procurato consultants have over 30 years’ experience of managing issues like these and we are currently helping several clients to improve their supply chain. Speak to us to help you establish just how much of an issue this is going to be for you and how to fix it.
We have access to unparalleled data and insights from across the whole market meaning we can help you to quickly understand where you benchmark in the sector and provide recommendations to improve. We design, develop and procure solutions to give you the right strategy and software.
Please contact us at Info@procurato.co.uk to find out how we can support your road to digital.