Automation is at the forefront of the current conversation on the future of business. In many industries, the COVID-19 pandemic brought the concept of automation to the modern corporate zeitgeist as businesses scrambled to maintain productivity in the face of massive supply-chain disruptions. Automation was always looming as the future of American enterprise, with the advent of robotic assembly lines, but the push has expedited as companies look for ways to maintain high quality service levels, maximize output, and control costs.
Struggles facing the claims management industry are most often related to logistical and staffing issues. According to the WHO, the rise in life expectancy and fall in birth rates will lead to 22% of the population being 65 or older in the next 20 years. While the average retirement age has been pushed back, this estimation still predicts a future with a dwindling workforce with no one to replace them.
The foreseeable future is therefore predicated upon finding ways to quickly increase output while still cutting costs.
How Automation Can Drive Productivity
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Efficiency should be considered the premier driving force behind the push for automation. Processing claims involves management of a considerable amount of information with a human resourcing cost, and risk of human error. Companies are responsible for finding ways to safely simplify the process without sacrificing product quality. Machine learning, one of the prominent technological advancements of the past ten years, aims to tackle this problem.
Data Processing
The opportunity to bypass the human element of data-entry already exists without implementing advanced automated processes. It requires cooperation by both the claimant and the adjuster to use digital documents and still requires manual entry into the document the first time. Using these types of templates will increase basic efficiency for certain documents that are industry standard, but may not for those that are company specific.
By implementing intelligent automation solutions however, you can speed up data-entry and form-filling and reduce human interaction. Full application of this technology depends on the use of a few advanced computing tools, which come with their own challenges.
Robotic process automation – RPA tools are robotic software programs used to perform simple processes. They are useful for automating simple
and repetitive tasks, but are limited to the algorithm by which they are programmed.
Optical character recognition – OCR tools can be used to digitize printed or written text with varying degrees of success. An OCR converts text that would be unrecognizable to a computer process into a machine readable format so that it can be input into a database and searched.
Natural language processing – NLP tools are a form of AI that lets computers understand human speech and communicate back. They are typically seen in the form of chatbots like ChatGPT, which while capable of understanding and participating in limited conversation with humans, are limited by the scope of the databases they use to pull information.
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These tools can be helpful in gathering and validating the documents necessary to begin a claim and in interpreting incoming documents throughout. Chatbots could be utilized to interact with policyholders 24/7, allowing for constant claim updates.
Automatically digitizing and consolidating incoming information would allow users to more easily track the end-to-end claims process, and view information previously submitted. A consolidated view would also make identification of gaps and detection of fraud simpler, because large quantities of data can be automatically filtered to surface inconsistencies.
However, because these automated processes are based on human-written algorithms and code, they are still at risk of operating errors. A person still needs to verify the inputted information for quality and potential error. If an issue with the automated process is not caught early, countless claims could be affected, causing a delay in the cycle.
New processes and tool development also have a considerable start-up cost to consider. Large companies may be able to integrate a team of developers to write or maintain algorithms and process code, but smaller organizations will likely need to outsource this work, subject to substantial cost based on scope.
Remote Reporting
While remote reporting is already industry standard for automobile insurance carriers, there is a growing expectation for all insurance policy holders to be able to interact with their policy and any ongoing claims digitally. This has led to a trend by insurance carriers and TPAs to utilize smartphone applications to process claims.
The goal of creating a more consistent connection between a policyholder and adjuster is a boon for the adjuster in particular. Companies can leverage the fact that more people have begun to rely on their phones for everyday administrative tasks. Phone camera technology has advanced to allow policy holders to provide documentation, as well as photos and claims directly to their claim manager via their phone, a solution to claims reporting has emerged. Claimants can provide documentation, but also photos and videos, right on their phone and connect it straight to their claim manager. In some cases, field adjusters might not be necessary to inspect a particular claim, allowing them to be applied elsewhere.
By eliminating part of the data gathering process for adjusters, the claims process can be sped up exponentially, reducing the time to a resolution and allowing adjusters to focus on other aspects of the case. A certain level of buy-in is necessary from the insured who may still prefer the traditional claims process experience. There is also a limitation for policyholders with spotty connection to the internet or reluctance to use an application where traditional investigations would still be necessary. This model also relies on customers’ preference of using their phone for claims processes where some may still have a preference for traditional investigation and claims processes.
Blockchain as a Future Solution
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Blockchain refers to information security technology where each reference point is double-encrypted and unique to ensure that there is no single point of exposure to security risk. Blockchains are most commonly used for financial transactions, but could theoretically be applied to any interaction seeking to ensure increased security.
Blockchain technology can be applied to claims handling through the creation of smart policies when the goal is partial process automation. For example, in the event of a recorded hailstorm, a policyholder in the affected area could be notified to start the claim. If users were opted into enough information databases, entire portions of the claims process could then be automated. Because every single block in the chain is visible to anyone, blockchain also accommodates an almost perfectly transparent process.
While this type of automation is compelling in terms of efficiency gains, blockchain still has downsides. Blockchain technology is a decentralized and unregulated system. Because each individual needs to apply their personal key to create their block in the chain, transactions only occur with mutually agreed upon terms. Blockchain allows for quicker transactions at the expense of the safety net of regulation.
Similarly, because blockchains are a new technology and have mostly been applied in unregulated markets (e.g., cryptocurrency), there is little to no legal precedence for how to handle deals conducted using this method. There are also risks for claimants who do not fully understand their policy, leveraging technologies in these types of emerging fields.
Impact of Automation on the Industry
Automation represents the future of all business in some respects, but it also represents major changes to the employment landscape. If accelerated prematurely, automation will result inconsiderable job loss.
Companies interested in streamlining their claims process should consider how they can retrain or refocus current employees while prioritizing efficiency. Downsizing teams and replacing them with an automated system would have a dramatic effect on the future of the claims job market. The focus would likely shift to adjusters with experience utilizing automated systems, but also prominently on tech support and software engineers to build them. While the initial work of updating or replacing systems might be able to be outsourced, employing in-house technicians to maintain the systems should become the norm to ensure autonomy and control of their process.
The shift in the industry towards these automated processes might also require an adjustment in ideology. Streamlining the process is good for business, but not always good for the consumer. Special care should be taken to ensure that there is some human element to any automated system, to ensure that user frustration and technological complications can be handled quickly, particularly to accommodate anyone uncomfortable or technologically illiterate. This might have an impact on companies that emphasize quality customer relations as their business tenants. Accelerated pushes to automation may cause a disruption to longstanding client perspectives of quality customer care.
