By Ravi Mathur, Co-Founder and CTO, Insurance Samadhan
The advent of technology has created a new market and opened up new avenues for many industries. Over the years, technology has become the backbone of almost every business. Whether it is education, marketing or advertising, everyone has taken advantage of the benefits of technology. When it comes to the insurance industry, one of the main determining factors for potential customers to decide which company to choose is the claims payout ratio, as companies compete for market share. Claims settlement is not as simple as one might think; the main reason is that insurance companies have to process thousands of claims every day, depending on how many customers they have.
The insurance claims journey has always been a pain point for customers. There is a lot of confusion about its management and rules. Because of this, they have prepaid a technical product to hedge against risk, and when the “moment of truth” comes and they want to recover a loss, they have to come up with a complex, cumbersome, time-consuming and process iterative. As it is clear that customer expectations have changed in line with the digital world, insurers also need to up their game in order to stay in the market.
What disruptive technologies are reshaping insurance operations?
Artificial intelligence, machine learning and robotic process automation are some of the most disruptive technologies in the insurance industry. Due to the sheer volume of daily claims under the old traditional claims-handling model, insurance companies were struggling to expedite the process. In the claims data, it is difficult to discern specific patterns that require closer inspection by humans. However, with artificial intelligence, identifying specific claim patterns at random or at scale only takes a few minutes and skillful programming. Moreover, all this can be achieved without significantly increasing operational expenses or taking too much time.
In the P&C and employee industries, AI and RPA have increased the possibilities for automation. For example, machine learning algorithms are used for fraud detection to detect anomalies that even the most trained human cannot detect.
Big data and analytics: Data is the most valuable asset for every organization. Using big data analytics, for example, you can accurately predict patterns and improve your decision-making capabilities, reduce operational costs, improve claims triage, and even spot emerging trends. A long-standing issue for the insurance industry has been the claims process. It is cumbersome for insurance companies to verify claims manually, process claim amounts, and segment policyholders before claims are made to avoid undesirable outcomes.
Insurers were lucky that data analysis saved the day, like the proverbial knight in shining armor. With all the data available to insurers today, it has become easier for them to segment policyholders and provide better products tailored to their needs. As a result, some insurance products have been cross-sold and up-sold, and customer satisfaction has improved. Additionally, Big Data has helped insurance companies process claims faster and more efficiently.
With the help of technology, or more specifically, the use of blockchain infrastructure and sophisticated software to analyze data, fraudulent insurance claims can be more easily detected. The assistance offered by technical means not only helps the company bear the burden of unnecessary costs, but also the customers on whom the responsibility for unforeseen accidents/incidents has fallen fraudulently. Along with the many benefits of digital transformation that result in renewed efficiency, ease of management is also one of the major advantages. Furthermore, it also enables a company to provide smoother and faster services to its customers, which leads to fewer complaints from them.
There will be a lot of disruption in the industry. While these changes may not happen overnight, a number of them are already beginning and there is a first mover advantage. Insurers will be better served by clearly explaining their strategy and adjusting their operating models accordingly. A change of this magnitude will take years, but insurers can gain a competitive edge and prepare for 2030 by laying the groundwork now.