Editor’s Note: In August, Karen Furtado, from SMA-Strategy Meets Action, offered her views on the near-term impacts of modern technology on claims processing. She referred to the coming state as Claims 2.0. In this post, Karen’s colleague, Mark Breading, takes a longer view he calls ‘Claims 3.0.’
Recent research by Strategy Meets Action on property and casualty claims paints an interesting picture of insurer plans for the next three years. The transformation that will take place over this time period will move insurers to a more sophisticated level that SMA calls Claims 2.0. This transformation will encompass a shift in the marketplace, a shift in mindset, and a real shift in requirements as insurers make major improvements in their processes for handling claims and the capabilities that enable them to deliver greater efficiency, improve service, and capitalize on information.
SMA expects the transformation of claims over the next decade to be even more comprehensive and game changing – moving insurers to an advanced state that SMA defines as Claims 3.0. While the transformation to Claims 2.0 will significantly enhance efficiencies and the effectiveness of the claims handling process, the evolution to Claims 3.0 will fundamentally alter the nature of how claims are managed. Claims management will become more proactive, real-time, collaborative, and analytics-based. The focus will gradually shift from reactive claim handling to proactive loss management. Ultimately, claims professionals have the potential to take a more active role in risk management and to work more closely with underwriting. Let’s explore the reasons for these coming advances, assess the impact of the transformation, and discuss realistic expectations for what the future of claims operations should be.
Reasons Claims Will Transform Significantly
Predictions for major transformation in the claims arena have been made in the past, but the industry has moved slowly. Why should we expect new predictions to be any different? SMA has identified four key factors that demonstrate advancements and convergence that are driving significant change.
- Real-time risk information – The instrumentation of trillions of “things” enables the connection of a steady stream of information about the current state of those items. Miniature sensors attached to or embedded in vehicles, houses, appliances, clothing, and even living things are able to collect information about physical characteristics including location, temperature, speed, weather, and other factors on a real-time basis. This information can then be sent via GPS to insurer systems to assess the implications for risk and even enable proactive loss prevention.
- Powerful analytics – Thanks to a burgeoning new breed of sophisticated analytics technologies that are easy to use, the collection of massive amounts of real-time risk information can drive powerful insights and be used to spot trends and reveal new insights.
- Social media and mobile technologies – Technology is no longer solely the province of IT experts behind glass walls. Social media capabilities enable everyone to communicate and collaborate, and mobile technologies facilitate information exchange and communications anywhere on the planet.
- Customer demands and the quest for competitive advantage – All the new technology and information capabilities provide significant opportunities for insurers. Yet, there is no overwhelmingly compelling reason to change for the sake of technology alone. The ultimate reason that dramatic change will occur is the customer, who will demand new products, services, and methods of communication. Customer demands and expectations will change the levers for competition.
These four factors will combine to create a new claims environment that is very different from what is common among insurance organizations today.
Results of Transformation to Claims 3.0
What new business capabilities will result from the intelligent deployment of new technologies and information to meet customer demands? At the macro level, SMA projects that four major new areas of capabilities will increase the ability of insurers to better manage risk:
- Increased collaboration for risk management between claims professionals, underwriters, and customers. Risk management will become more of a continuum – an ongoing activity starting before the risk is underwritten, extending to the period while insurance is in effect, and covering loss incidents and restoration efforts.
- Increased interaction with customers. The wealth of information and insights available about specific risks, events, and behaviors will be parlayed into communications, advice, and alerts that go directly to customers and to partners in a position to influence and guide.
- Increased impact on the insurance product. Risk management and loss mitigation efforts in real-time mode will influence how insurance coverages are packaged, priced, and serviced.
- The emergence of the “super-adjuster.” These new technology, information, and communications capabilities will not replace the claims adjuster. Rather, they will significantly amplify his or her expertise and experience. The adjuster-of-the-future will be an information-enabled combination of an advisor, adjuster, and marketer – capable of extraordinary efficiency and superior effectiveness.
These new business capabilities offer exciting new potential for insurers. The Claims 3.0 vision may seem like a far-fetched pipe dream – light years beyond where most claims organizations are today, and new technology capabilities have a tendency to excite people and invariably result in hype. Let’s look at realistic expectations for how the future of claims might unfold in the next ten years.
Realistic Expectations for Future Claims
The reality is that the technology to enable the transformation to a Claims 3.0 environment is available today. While it is unlikely that the entire industry will accomplish the movement to the Claims 3.0 vision in the next ten years, pieces of this vision are already emerging at more than a handful of individual insurers. It is highly likely that most leading insurers will lay out a strategic plan that incorporates many of these elements and many will make major strides in achieving the business strength that the Claims 3.0 world provides. The insurers that are the most able to move rapidly to this new state of claims capabilities will have the potential to change the rules of the game and leap ahead of their competitors.
About the Author
Mark Breading, a Partner at SMA, is a recognized expert in advanced technologies and their implications for the insurance industry. Mark has exceptional knowledge of data and analytics, customer communications in insurance, and advanced technologies including mobile and social media. Mark can be reached at [email protected].
Great post, Mark – there is lots of new news for P&C these days. Important to highlight a fundamental here too though. The analyses are only as good as the data they are built on – and the more insurers rely on real-time, automated information, the more important it is that the underlying data be top quality. You might want to check out this post – gets into these important underpinnings: