Digitalizing insurance claims and underwriting Digitalizing insurance claims and underwriting

It is obvious that the way we work has changed dramatically in the past 12 months. And that there will be longer-term consequences for most industries, including insurance, in areas such as workforce locations and infrastructure, and more flexible business models. These changes must be dealt with alongside other challenges facing insurers, including environmental, social and governance (ESG) concerns, and their role in supporting financial resilience in the economy more broadly.

In my view, there is one challenge that stands out from the crowd. If tackled successfully, it would give insurers many more tools in their arsenal to overcome all the others. That challenge is digitalization.

Many of us have been saying for years that the insurance industry needs to be far more ambitious in its use of digital solutions. The past year has brought this into sharper focus. Now is the time to accelerate digitalization initiatives. Not despite other changes taking place, but because of them.

At the heart of the insurance value chain, claims and underwriting are the natural place to start. In Clarity on Insurance, we look at how to modernize claims processing and underwriting approaches in order to enhance efficiency, mitigate cost pressures, improve insights and reporting, and deliver a superior customer experience.

As we look at the future shape of insurance organizations, we must reflect society and customers’ evolving expectations. For personal insurance lines, this means changing insurance from an administrative task to a lifestyle product that accompanies customers throughout their day, with automated alerts and helpful advice. For commercial insurance lines, it means proactively helping clients identify current and emerging risks. For both areas of insurance, digital solutions should leverage data, cloud and cognitive – so that insurers offer products and solutions that seamlessly cover the full range of prevention, protection and care.

Upgrading the claims organization for latest technologies would enable insurers to make better use of the data they hold, and to move to purpose-driven claims. From applying data-driven insights to prevention, using data analytics to predict likely claim litigation, and deploying sensors and drones to help recover losses – I see huge potential. What’s more, digital solutions can be applied to the entire process, before, during and after claims.

As a core process, life underwriting should take advantage of technology solutions to better understand customer interactions and reach complex decisions. Underwriters need to assess risks from multiple angles, and to analyze large and growing amounts of raw and structured data. Artificial intelligence, or AI, can give them the ability to quickly process huge volumes of data across multiple sources simultaneously.

Non-life reserving is another area that could benefit. It has been extremely slow to evolve and remains a resource-intensive manual process at many insurance organizations. Improving it requires reviewing reserving software tools, redesigning processes, and deploying AI, among other measures. As well as improving efficiency and overheads, it can lead to more in-depth analysis of key reserving risks and freeing up specialists to perform more valuable tasks and reach higher quality decisions.

Delivering all these changes in a consistent and joined-up way requires an effective Data Science & Machine Learning platform (DSML). In addition to a core system platform, the DSML must be customized and ensure that data-driven solutions are plugged into the insurer’s broader innovation approach. My view is that insurers should develop their DSML in-house, making use of Open Source solutions. As well as producing a better outcome, I believe this allows insurers to create a pool of internal expertise that is useful not only in a DSML context, but also more broadly in optimizing their understanding and use of data.

The digitalization of the insurance industry is overdue, and efforts need to speed up. For our magazine “Clarity on Insurance”, we interviewed the CEOs of Sanitas and Vaudoise Assurances for their insights into this topic. Their take on the impacts of digital solutions – and crucially, how to select and implement digitalization initiatives – is fascinating and well worth a read.

With so much changing around us, and so much at stake, business transformation is a priority agenda item. And digitalization is key to making it more successful. Insurers have lagged behind many other industries in this regard. It is now time to look, learn, and close the gap.