The Outsider Effect: How Tech is Shaping the Future of Claims

Karlyn Carnahan Research Director

Celent

About Celent • Global business and IT strategy research

– Digital and Omni-Channel – Innovation and Emerging Technologies – Legacy and Ecosystem Transformation – Data Mastery and Analytics – Operational Excellence

• Ongoing advisory services • Vertically-oriented consulting • Staffed by industry experts - 13 FTEs devoted to insurance with additional

coverage by analysts in other practice areas • A division of Oliver Wyman - global financial services consultancy with

1,400 consultants, offices in 40 countries

Insurer Corporate Objectives Fall Into Three Broad Categories. Claims Impacts The Achievement Of All Three.

Get Bigger - by growing the top line

Get Leaner - through higher productivity and expense control

Get Smarter - better pricing, better risk selection, better claims adjustment

Match Customer Service demands with the business

strategy

Keep external loss costs and internal operating costs low

Make a fair settlement paying the appropriate amount

• Match customer service to the profile of the customer

• Claimant satisfaction • Consistent experience • Differentiate the company

• Adjuster productivity • Faster cycle times • Task automation • Claimant and broker self service • Assure regulatory compliance

• Rules driven decision making • Workflow driven processes • More accurate reserving • Less leakage • Better data

Carrier Goals Claims Strategy Claims Imperative

Mega Trends To Consider • Data – New data proliferating, old data digitized,

internal data more readily available. • Mobile – deeply entwined with real time data.

Quickly becoming the most common interface for many new products and services.

• Collaboration – Involvement in everything. • Social – Explosive growth and wide adoption.

Diminishing concerns about privacy. Escalating concerns about privacy. • Gamification – game techniques to drive non game behaviors. • Location based services – expanding beyond mapping and navigation into

contextual deployment. • Smart photos – payment processing, facial recognition, massive amounts

of unstructured data. • Connectivity – the Internet of Things

Customer Expectations Changing • Changing demographics. • Customer empowerment. • The desire for self-service. • Customers want relationships. • Expect every touch point to be excellent –

a sense of entitlement. • Smooth process - no duplication of paper or information. • Customers expect instant gratification. • FAST FAST FAST. • Transparency of process.

What Are Carriers Doing?

• Few carriers are doing nothing when it comes to claims.

• Almost half are doing some kind of replacement effort.

• Large carriers are more likely to rewrite/extend.

• Midsize and smaller carriers are more likely to use vendor packages .

• Why? • Claims systems are aging. • Expensive to maintain. • Business rules embedded in code. • Decoupled from policy or customer

systems. • Rooted in financials not service. • Available resources are shrinking.

20%

20% 60%

2015 – Midsize Carrier Claims Admin Plans

Begin Replacement Replacement in Process Significant Enhancements Maintain N.A. / No plans –

Beyond Core Claims Systems What Else Is

Going On?

FNOL • Typical:

– Claim reported to call center who enters data taking information only.

– Outsource after hours. • Newer

– Multiple intake channels - web, phone, video and mobile with direct integration of intake solutions to the claims admin system.

– Photo upload with augmented reality – e.g. outline of vehicle overlaid. – Scripted CSR responses provide a consistent customer experience – Scoring to assess complexity and drive different questions or workflow. – Location based service provided at time of FNOL. – Proactive FNOL.

Assignment

• Typical: – Manual assignment by supervisor.

• Newer – Automated, real time best routing – Adjuster assignment based on

expertise/complexity. – Analytics used to optimize use of

external adjusters. – Electronic assignment to vendors – Use of third party location or event data such

as weather data to help with the assignment. – Just in time work assignment.

Estimating • Typical.

– Electronic process. – Check for compliance.

• Newer – Increasingly sophisticated tools such as

satellite imagery, laser measuring devices and 3D diagraming tools

– Collaboration tools to bring both claimants and vendors into the process. – Photo and video estimating transmitting data and video real time to claimants,

vendors or management. • Just plain cool .

– Drones. – Google glass.

Reserving

• Typical – Manual – adjusters determine the

reserve. • Newer

– Automated reserves based on average values.

– Predictive modeling/ multi-variate analysis.

– Estimation of value based on incident. characteristics- e.g. CrashBoxx.

Payments • Typical

– Payments are authorized by adjusters. – Payment types include check, ACH,

Deposit. – Some batch payment capabilities.

• Newer – Prepaid cards branded to insurance company. – Cards linked to negotiated purchases. – Onsite payments at insured’s location. – Predictive analytics used to alert adjuster on recurring payments. – Vendors pay themselves – if actual matches estimate.

Vendor Management

• Typical – Manual management. – Preferred vendor networks.

• Newer – Analytics used to manage vendor performance. – Medical bill review – linked to medical treatment plans. – Litigation bill review. – Out of network negotiation services. – Vendor portals. – Vendor scoring/segmentation.

Recoveries

• Typical – Manual management.

• Newer – Centralized departments. – Software support. – Predictive analytics– likelihood of recovery. – Intelligent assignment based on LOB, claim characteristics,

geo and carrier defined rules (skill levels, $$, etc.). – Demand advice based on prior behaviors. – Automated escalation. – Scoring based on third party data – e.g. real time comparison with

Consumer Product Safety Commission for recalls

Customer Communications • Typical

– Adjusters manage ongoing communications. – Templated letters exist.

• Newer – Automated Communications using business

rules, workflow and document generation capabilities to systematically automate customer communications.

– Omni-channel - email in addition to traditional mail. SMS/text claimants – especially in peak periods. Live chat is commonly available on carrier websites.

– Social media monitoring as well as integration with the call center

– Video tools for collaboration and communication.

Catastrophe Management • Typical

– Cat teams. – Heavy use of external adjusters.

• Newer – Pre identification. – Pre notification. – Aerial imagery. – Weather overlays after the cat. – Automated identification of cat claims for

reinsurance notification. – Crowdsourcing weather data

Data and Analytics

• Typical – Basic reports available. – Few carriers use sophisticated

techniques. – Majority of carriers are unable to do

ad hoc reporting without IT intervention.

• Newer – New data elements available. – Contributory – Text mining. – Collaborative analytics. – Predictive analytics.

In your opinion, how important will the following sources of data be in the insurance industry in the near future (2–3 years)? (In % of respondents; n=202)

Predictive Analytics

• Four issues carriers must deal with to effectively apply predictive analytics. – Data. – Models. – Operationalize. – Tuning and Governance.

• Typical focus. – Forecast medical costs and

utilization. – Likelihood of return to work. – Identify known and discover new

subrogation indicators/likelihood of success.

– Identify litigation indicators. – Early settlement indicators. – Route to the right

adjuster/optimize workloads. – Optimize claims service processes

to deliver the right interventions. – Fraud.

Fraud • Typical

– Manual red flags. – Business rules based analysis.

• Newer – Data consolidation across a number of

systems – both internal and external. – Visualization of data makes it easier to

identify patterns across existing and past interactions.

– Algorithms are used to identify, rank, and prioritize potential claims fraud.

– Social media is being used effectively to identify behaviors after a claim that are counter-indicated by the event.

0% 20% 40% 60% 80% 100%

Social or sentimentanalysis tools

Data Visualization tools

Fraud Tooling

Predictive Analytics

We have already invested in this technology

We will definitely invest in this technology in the near future

Key differentiator in our market

We have no plan to invest in this technology

I do not know what it is

Insurer Investment in Data-Related Technologies (Percentage of Respondents, n=178)

Damages Contraindicated By Injury Supplemental Sources of Income

What’s Keeping Carriers From Doing All Of This?

• Cultural inertia - Carriers tend to believe that their fabulous adjusters are handling claims well. – “We have a 97% customer satisfaction rating on our claims”.

• Underwriting takes priority. • It’s expensive. • Data challenges. • Existing systems don’t support rules, workflow, customer focus etc. • Many carriers simply aren’t agile.

But We’re Going to See More - Predictions for the future

Data • Significant increase in analytics. • Broader availability of data – black

boxes, in car video, traffic cameras, telematics, weather.

• Dramatically expanded use of predictive modeling

• Behavioral monitoring after the claim - e.g. Bio-monitoring, telematics, and a wide variety of other structured and structured data.

• Integration of telematics data with estimatics.

Self Service and Digitization • Expanded straight through

processing of claims • Dynamic business rules – those

that learn from adjuster behaviors and modify themselves to adjust to changing situations.

• More self service capabilities with a significant increase in collaboration capabilities

• Gamification. • Real time, any time, anywhere e-

payments.

. Vendor Management • More sophisticated vendor

management tools: best vendor routing and collaboration tools.

• Preferred networks will grow significantly . Carriers continue to ramp up their efforts to connect electronically with suppliers.

• Dynamic discounting techniques will be piloted in relationships with large vendors.

• Supply chain finance offerings will be explored in more detail.

• Mobile capabilities– (capture, e-invoicing, and e-payments) will increase

• .

• Anytime, anywhere multi-channel payments - cards, direct debit, peer-to-peer fund transfers and mobile payments in addition to the traditional methods.

• Payment hubs will be explored to manage payments more efficiently and easily.

Just plain cool • Drones. • Project Tango. • Google crowdsourcing of indoor

locations. • Internet of things.

Looking Forward • Claims has a strategic impact on a carrier. • Align investments with your core strategy - product, customer intimacy,

distribution, expense mgmt. • Available technologies to support claims are exploding. Think of

innovation as a discipline. • Take the customer perspective. Start by mapping the customer

experience. • Think through who else can do it. It’s a connected world. • Keep up with the newer technology trends with quick agile pilots to be

sure they’ll really deliver results.

Questions?

Karlyn Carnahan Research Director

Celent 415.720.8753

Twitter – Karlyn.Carnahan