Carriers cut forecasts as inflation drives up cost of claims
Saga, the over-50’s market specialist slashed its profit guidance by two-fifths as a result of the rising cost of motoring claims.
Admiral, DLG Group, Sabre all have valuations shrinking and profits adjusted downwards fo the same reason.
Swiss Re recently predicted that premium increases would not catch up with claims inflation until late Spring 2023. How best to mitigate this trend?
70% or more of an insurer's costs are incurred in claims operations and payments and as claims inflation hits carrier's profits hard never has there been a more important time to choose the optimal technology partners to help you address these challenges.
Two years ago, many carriers looked at digital claims vendors to help augment claims adjusters and transform customer experience. Too often, the price was high and the technology complex. Support from the C-Suite patchy at best. Claims a poor second or third to the glamour of online Quote & Bind, Comparison websites and distribution. Those same carriers are refocussing on claims transformation today and even those that made advances in one line of business are painfully aware that others like home, travel, pet and speciality are often woefully stuck
So how best to choose the best option for your business? Find answers below
- An introduction to the technology
- The range of options on offer
- Point Solutions essential to integrate with these platforms
- The data sources that are vital for optimal decisions and outcomes
- Start with a roadmap
- Organisation and structure to innovate
- The evaluation phases
1) The technology
It is telling that whilst all core technology platforms feature a claims module most customers license a separate digital claims platform. With circa 70% of an insurer’s costs tied up in claims, a key determinant of customer satisfaction and retention, this decision is sensible.
Just as with core platforms you have a range of options including Claims Ecosystems Providers like CoreLogic and Verisk and what you might term Claims CoreTech i.e., modern architecture, cloud native, public hosted, microservices and API architected with low-code/zero-code self-configurability. RightIndem is a shining example of the latter.
Some technology partners specialise e.g., CoreLogic with property, home and contents whilst others cover multiple lines of business e.g. -Verisk, and RightIndem.
Do you put all your trust in a cloud-native, micro-services and API driven platform that has a limited number of customers, scaled only to modest claims volumes and may have shown focus in only one or two lines of business?
Or do you choose a proven “new legacy option” that has scaled across many large Tier 1 and Tier 2 insurers but has an amount of technical debt hidden in the various modules and tends to be expensive, more complex to deploy and require major upgrades every three/four-year period?
There is a third option- a few digital claim management platforms have scaled up and offer proven ability to deal with millions of claims per annum. And scale up from just thousands to hundreds of thousands of claims at a rate to match your own capabilities. That make it easier to prove the technology in one line of business and, once the technology and relationship is trusted, expanded over the whole business. That means you can offer customers a similar digital UX and satisfaction level across auto, home, travel, pet and all lines of business.
RightIndem is one of those claims platforms.
You will require assurance that the platform can integrate with core third party software to build out the functionality, digital UX and claims journey required for all lines of business, different regional/national compliance and regulation and different levels of claims complexity. Many vendors talk of their API documentation and ability to integrate but some lack the stamina and inhouse resources to fulfil the promise. Supporting an integrated ecosystem of technology partners and software is vital as no one technology partner delivers everything.
You will need a claims platform that already passes data in real-time to and from these market leading applications; each one making a decision automatically for simpler claims or enhancing claims adjuster decisioning when human intuition and skills is necessary e.g. more complex and unusual claims. In each case, the claims platform ensures the evidence and decision is validates and passed to the next step/stage for the next decision(s) to be made.
Key to success is the trust you feel you can place in the people involved to collaborate with your own teams. Geoffrey Moore is an outstanding advisor on the technology adoption lifecycle and on technology start-ups achieving scale. He emphasises that founders and managers of start-ups are often not the ones suitable to take innovators beyond the first few customers.
2) What range of options do you have?
Note: Listed in alphabetical order- no implied ranking of capabilities
Legacy Ecosystem Claims Management Platforms
- CoreLogic for property
- Verisk for property and auto
New Claimstech Management Platforms
- Claims Genius
- Claim Technology
- Salesforce Industries (Insurance)
- Synergy Cloud
No one platform will have everything an insurer, broker, MGA requires. You will need to add third-party solutions to deliver all the requirements an insurer, broker, MGA will demand. Whilst all vendors claim to have large API libraries and integration capabilities many will lack the resources and commitment to be able to connect the required mix of third-party apps and data sources we examine below
3) Point Solution Software
Policy Admin, Claims Validation and Triage
- Open GI
SMS Communications Platform
- Hi Marley
Claims Damage and Cost Estimation (often combinations of these)
- Be Valued
- Claims Genius
- Value Checker
Property Repair & Restoration
- Next Gear
- BAE NetReveal
4) Key Data Sources for claims management
Insurance was founded by leveraging the best of data to price risk, provide protection and manage business. “Data-driven” is a familiar refrain but the question is which data and intelligence is best and how can I integrate it into my systems?
Some platforms are positioned as key data providers e.g., CoreLogic for home and property from selling to protection and Verisk for auto and property. Their offerings are most complete in their home territory, North America, and expanding in Europe especially the UK and DACHS regions.
Claims platforms generate data in real-time and are a prime source of intelligence for decision making, fuelling AI, machine learning and rules engines including counter-fraud.
In the New Legacy platforms AI and ML is generally “on the side” in different database silos as the operational database was not designed to support real-time analytics. Being separate the learnings from the AI/ML cannot be connected to the core claims platform. The newer ClaimsTech vendors deem data, data science and analytics central to their platforms.
There is a frightening amount (circa 80% of unstructured data hidden in data silos, web forms, emails, SMS messages, voice files) that insurers must be able to access, normalise and analyse. Yet that data too often lies hidden and the value unrealised.
By the time the data is presented in dashboards, reporting or alerts it is often too late to take timely action and the costs of that failure are high.
New ClaimsTech platforms help address that issue and whilst New Legacy claims platforms will you must beware of the potential complexity, time and cost involved in connecting all those silos and especially delivering real-time insights.
In addition, insurers need to license external data to feed the AI applications penetrating all parts of insurance with a selection listed below. Again, you will want to ensure that claims platforms and core technology can surface and leverage these.
- Accuweather-weather data
- CoreLogic- manage property data for selling, financing, and protecting property
- Hazard Hub- property risk data
- ICEEYE- global flood earthquake and CAT damage data in near real-time
- KETTLE- house-by-house risk assessment across USA
- LexisNexis- vehicle, ADAS and home data
- McKenzie Intelligence Services Ltd wide range of connected data sources and data management
- Mitchell- Auto data
- SAFEHUB- building specific US earthquake damage
- Synectics identity, financial and fraud data
- Terrafirma property risk data
- Verisk- auto and property data
- WeatherNet- granular and near real-time weather data
- WhenFresh- wide range UK property data
5) Start with a roadmap- Some advice from Geoffrey Moore.
“Let us assume we have a clear design for our desired future state. It won’t take you long to realize there is little chance that a single intervention can get you from here to there. So, the next major deliverable must be a roadmap organized around a maturity model, or what we like to call, a stairway to heaven. Each step up the stairway should be designed to deliver value upon completion, thereby allowing the organization to pace its change management, funding things as it goes, building its confidence, and reassuring its various stakeholders.
With such a roadmap in place, now you have a current-state/future-state accountability mechanism that can govern each stage of the transformation—the software and systems, the systems integrators, the process owners insider your enterprise, and the people responsible for executing the processes. As we have noted elsewhere, digital transformation is not a restaurant. You cannot simply pay for it and have it delivered to your table. It is a gymnasium. You still have to pay for it, but to get any value out, you have to actually do the transformational work yourself.”
6) Organisation and structure to innovate
Running a business is a challenge and everyday operational issues can take up 70%-80% of time and attention span.
In February 2022 Russia invades Ukraine, cyber activity increases, and Australia suffers CAT flooding. The West’s financial sanctions against Russia impact capital, financial and insurance markets. There are always events soaking up bandwidth and the ability to make and execute decisions.
Nevertheless, innovation, in general, must be a core strategy, but the approach to it must also change, and it must be viewed with a bit of a different lens. When times are challenging for insurers, innovation is usually the first thing to go due to bigger priorities or limited budgets and resources. Carriers may not be able to afford to focus as much as they’d like on innovation during those times.
To stay relevant, however, they must find ways to keep innovative pursuits going and part of their portfolio. Easier said than done, however!
One way is to establish a transformation unit staffed with a mix of staff from the insurer and digital transformation expertise bought in from outside to avoid tunnel vision. Reporting to the CEO directly the Chief Innovation Officer must be able to anticipate disruption, new products hitting the market, new entrants to the market like NeoBanks, and the viable emerging technologies that business and commerce will adopt and deploy.
This team must also work closely with business units, central and business IT, marketing and sales, finance and counter fraud, procurement and legal. It must persuade, make sound business cases and ensure the insurer is not outflanked by competitors or disrupters.
This will help ensure a viable, world-class stairway to heaven plan that is bought in to by the whole company and driven by the digital transformation team. With that in place the insurer is better positioned and resourced to choose the right mix of technology partners.
7) The evaluation phases
Gartner published a very useful illustration of the planning and evaluation to be undertaken when choosing technology partners. Combined with the advice above it will help find the right partners to ascend the "stairway to heaven".