Handling insurance claims efficiently is crucial for both insurers and policyholders. Claims processing expenses make up almost 70% of total costs for insurance companies. At the same time, 87% of customers see effective claims resolution as an important criterion when deciding whether to switch providers.
It‘s clear that legacy claims processes strained under manual data entry, siloed systems, and paper-based documentation are no longer adequate. Insurers need to tap into modern technologies to digitize and automate claims handling.
In this article, we explore the top 7 technologies transforming claims management:
- Chatbots
- Optical character recognition (OCR)
- Computer vision
- Advanced analytics
- Blockchain
- Internet of Things (IoT) / Telematics
- Custom mobile apps
For each technology, we analyze how it can facilitate specific steps in the claims processing workflow to deliver efficiency gains, cost savings, and superior customer experiences.
Overview: The 5 Main Steps of Claims Processing
Before diving into how technology can help, let’s quickly recap the key phases of the claims process:
- First Notice of Loss (FNOL) – The policyholder files an initial notice to alert the insurer of the loss event or damage.
- Initial Claim Investigation – The insurer collects information, documents, photos to do a preliminary investigation into the claim.
- Policy Checks – Determines if the loss event and claimed items align with policy coverage.
- Settlement Calculations – Assesses the scope and cost of damages to calculate settlement amounts.
- Payment Disbursement – Issues payment to the insured customer or repair provider.
Many of the steps involve Manual processes today – sifting through paperwork, validating details across multiple systems, adjudicating claims through individual review.
This is tedious work and full of friction for staff and customers. Increasingly, insurers are wake up to the digital capabilities that can dramatically improve efficiency.
As shown in the visual above, different technologies can facilitate specific phases of claims management and billing:
Now let‘s analyze the top 7 categories powering the digital claims revolution.
1. Chatbots Eliminate Claims Communication Friction
Chatbots powered by natural language processing (NLP) can streamline two vital but often manual parts of claims management – capturing First Notice of Loss (FNOL) details and coordinating payment disbursements.
Virtual agents can guide customers through initial questions when reporting a new claim, gathering pertinent details through conversational dialog. This eliminates frustrating IVR phone trees or needing claims staff to handle routine inquiries. Some advanced chatbots can also help customers take and submit photos of damage, or fill out digital forms, further accelerating FNOL capture.
Post-adjudication, chatbots also smooth the payment process – answering common questions about claim status, documents required, or when funds will arrive. Automating these frequent customer requests allows claims staff to focus their time on value-adding claim investigation and complex inquiries.
According to Capgemini research, chatbots can resolve up to 70% of routine claims questions from customers, dramatically reducing inbound call volume. Other sources estimate 40-60% of frequent queries can be fielded by AI assistants.
As natural language capabilities continue to mature, smart chatbots will play an expanding role in digitizing high-touch claims processes.
2. Extract Insights from Documents with Optical Character Recognition
Insurers still rely heavily on scanning and managing paper-based files filled with loss details, medical records, auto repair estimates, and other key claim documents.
Optical character recognition (OCR) solutions can digitize these files for easier storage and analysis. More advanced OCR systems can even extract discrete data fields and instantly populate key details into claims management systems.
For example, software can scan a police report and automatically pull out the date, accident location, vehicle make/model, and other structured facts. Adjuster notes can be digitized to surface key observations and cost estimates. Medical reports yield diagnosis codes, doctor names, procedures, and clinical documentation.
OCR eliminate manual transcription that is slow and error prone. And digitizing documents into structured data unlocks the downstream use of other analytics tools for faster adjudication.
By some estimates, up to 50 hours per week can be spent processing paperwork by individual claims professionals. OCR solutions help digitize these archives to free up their capacity for higher judgement tasks.
3. Assess Damage Faster With Computer Vision
AI-based computer vision techniques can automate and improve various elements of the initial claim investigation process. These tools can evaluate photos and videos of damage submitted by policyholders or claims adjusters.
Sophisticated algorithms can detect the make/model of a vehicle, map damages onto a graphical overlay, and automatically classify the components affected – effectively replicating some of the manual effort by appraisers today.
By flagging and codifying crucial damage details early in the process, computer vision assists with predicting repair estimates. This allows insurers to reserve the proper financial reserves even before repair shop evaluations.
In addition, intelligent drone devices equipped with computer vision cameras can be deployed to scan damage across large sites like commercial buildings or auto accident scenes. This reduces back and forth visits while capturing comprehensive visual details.
Per McKinsey, automated computer vision assessments will likely handle 30-50% of vehicle claims within this decade, delivering major efficiency gains.
4. Apply Advanced Analytics to Uncover Insights
Modern data analytics encompasses a variety of sophisticated algorithms – correlations detection, risk modelling, predictive scoring – that help insurers better understand and forecast future outcomes.
Claims data, enriched by details from OCR and computer vision systems, offers fertile ground for advanced analytics. Historical patterns around loss events, repair costs, fraudulent indicators, litigation risks, and other key factors can be uncovered to guide smarter decision making.
Predictive tools can score claims for attributes that warrant more investigation based on similarities with past fraudulent cases. Behavioral analytics examines policyholder digital patterns pre and post claim submission to detect suspicious shifts that may indicate fraud.
In addition to fraud, predictive modelling helps better reserve for losses based on probabilities of settlement costs. This avoids leaving too little or too much set aside based on risk adjusted projections.
And as more enriched data gets captured digitally during claims intake, machine learning detection around litigation risk, escalations, total loss likelihood constantly improves – arming adjusters with data-drive guidance.
5. Use Blockchain to Radically Simplify Processing
Blockchain provides perhaps the most groundbreaking technological capability to truly digitize and automate the end-to-end claims process. This distributed ledger database establishes a transparent, immutable record of transactions and contracts updated in real-time.
Smart contract rules encoded directly into blockchain ledgers enable automatic triggering of claim payouts once predefined conditions are met. Once loss details are authenticated to meet policy terms, funds can issue without manual review.
Integrating feeds from IoT devices and external data sources ("oracles"), blockchain contracts come alive with real-world awareness. A weather data oracle could automatically verify a hurricane met wind speed coverage levels and trigger roof repair claims. Telematics from an auto accident could provide location/speed authorization to release payments.
With reliable data sources, multi-party logic, and irrefutable ledger history, blockchain smart contracts remove friction and intermediaries from today‘s convoluted claims processes. Early pilots have already proven dramatic efficiency gains in focused use cases.
6. Internet of Things & Telematics Deliver Real-Time Awareness
The Internet of Things (IoT) encompasses networks of connected sensors and devices that generate abundant streams of data on environments, equipment, and even people. In claims contexts, IoT delivers automation, accuracy, and immediacy.
FNOL Automation
Connected home devices can instantly transmit notices of water leaks, freeze damage, or fire/smoke detector activation directly to insurers for nearly instant claims creation vs. waiting for loss awareness. Industrial sensors monitor commercial equipment to catch failures immediately and begin remediation.
Similarly, IoT enable vehicles detect crashes the moment airbags deploy and automatically contact insurance partners through telematics systems while EMS responds. This brings an unprecedented level of real-time visibility to damage and accidents.
Enrich Investigations
IoT data also provides immutable proof of loss details that greatly simplify investigating root causes or policy applicability. Auto black boxes capture location, speeds, acceleration for clearer liability decisions and settlement calculations.
Home smart meters can reveal spike in electricity or water consumption from pipe bursts to confirm damage timelines. GPS trackers pinpoint commercial fleet vehicle routes. Each data point reinforces proof required for faster decisions.
By some predictions, real-time IoT claims reporting will become the norm within 3-5 years, given the pervasive installation of telematics and smart infrastructure.
7. Meet Customers Where They Are with Mobile Apps
With over 85% of adults now owning smartphones in the US, insurers need strong mobile presence for engaging digital native customers.
Claims-focused mobile apps allow policyholders to easily report new loss events, monitor claim status, and upload documents through smart workflows – no printing or desk visits required. Geolocation further simplifies photo capture of damage, dangerous conditions that require immediate response, and more.
Adjuster apps also facilitate remote loss assessments. Mobile inspection tools guide workflows, capture photos, annotate damages on drawings, and pull environmental weather/hazards data on demand through field devices.
Built for mobility from the start, these apps recognize small screens, offline usage needs, and location-relevant functionality surpassing bolted on desktop experiences. Low code platforms help insurers customize experiences rather than force fit out of box solutions.
Legacy paper-driven claims processes struggle to meet rising customer expectations and deliver the efficiency demanded by modern insurance economics. New technology – from AI assistants to blockchain contracts – tackle these shortcomings through automation and digitization.
Each innovation plays an important role spanning early loss notifications, document processing, geo-capture, decision analytics, and payments. While challenges exist around integration and change management, the progress being demonstrated across real world deployments illustrate the art of the possible.
Early movers will gain sustainable advantages in claims cost controls and customer satisfaction. So the time is now for insurers to build their capabilities in these crucial enabling technologies for the next generation of insurance claims.
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