Insurance claims processing is a crucial activity plagued by inefficiency. Manual claims handling accounts for around 70% of insurers‘ costs, according to Deloitte. It also enables the $80-100 billion in fraudulent claims that cost the industry each year as per FBI estimates.
However, automation can transform claims processing to reduce costs, fraud, and delays. In this 3200 word guide, we present top 3 insurance claims processing automation technologies that help insurance executives to reduce costs and increase customer satisfaction.
The High Costs and Inefficiencies of Manual Claims Processing
Let‘s first understand the key pain points with legacy claims handling:
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High Processing Costs: Up to 70% of an insurer‘s costs go towards claims processing, as per Deloitte. Manual processing requires extensive staffing.
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Fraud: FBI reports that over $80 billion is lost annually to fraudulent claims. Manual processes make fraud detection difficult.
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Long Cycle Times: The average claims processing time is around 30 days, according to J.D. Power. Errors and rework delay settlements.
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Low Customer Satisfaction: EY found 90% of clients consider switching after a poor claims experience. Inefficient processing often disappoints clients.
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Data Entry: Staff must manually enter policyholder data for FNOL and supporting documents into systems, wasting time.
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Document Processing: Classifying, routing, and validating piles of unstructured documents is manual and slow.
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Investigation Inefficiencies: Long lags to schedule loss assessments and collect third-party data lead to delays.
Automation addresses these pain points through improved productivity, accuracy, and speed. Let‘s look at the top technologies making this possible.
1. Intelligent Process Automation
Intelligent process automation combines robotic process automation (RPA) with technologies like OCR, NLP, and machine learning. This allows automating a wide range of manual claims handling processes to reduce costs and errors.
Here are some of the key capabilities of intelligent process automation:
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Document Processing Automation: OCR and NLP enable extraction of unstructured data from documents like claims forms, assessments, bills and ID cards. This data can auto-populate insurer systems.
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Chatbot Claims Interactions: NLP powers chatbots that allow policyholders to report claims quickly through conversational interfaces 24/7. Reduces call volume.
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Adjudication Acceleration: Machine learning helps validate claims against policy terms, calculate complex payouts, and reduce settlement times.
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Fraud Detection: Anomaly detection algorithms constantly analyze claims data to identify suspicious patterns indicative of fraud for investigation.
Let‘s analyze the impact of intelligent process automation across the claims processing workflow:
Streamlining First Notice of Loss
Policyholders can report claims seamlessly via NLP chatbots. Bots ask structured questions to capture claim details, extract related documents using OCR, and auto-populate insurer systems. This reduces data entry and speeds intake.
For one insurer, chatbots lowered FNOL processing time from over 5 minutes to 30 seconds. They plan to handle over 50% of all FNOL via bots within 2 years.
Automating Document Processing
Previously staff wasted hours sorting documents manually. Now OCR extracts data automatically while NLP classifies unstructured documents based on content. Machine learning routes them to relevant processes in insurer systems for adjudicators.
One insurer achieved 90% accuracy in document classification with NLP, improving processing speed 4x.
Augmenting Claims Investigation
Bots gather documents and data required for investigation from diverse sources automatically. They schedule virtual or in-person loss assessments per rules. Machine learning also validates claims against policies to accelerate settlements.
An insurer shortened investigation cycle times by over 15% using bots for documentation and assessments.
Detecting Fraud Early
Intelligent algorithms analyze claims data to spot anomalies in real-time. They identify suspicious patterns like changes in writing style on forms or unusual claimed losses compared to the policyholder‘s profile.
For one insurer, machine learning reduced fraud leakage by $3 million annually. It also cut false positives by 60% to minimize customer friction.
Results Achieved by Insurers
Leading insurers who implemented intelligent process automation observed significant results:
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Aon cut operational costs by 25% in underwriting while improving staff productivity.
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Allstate reduced FNOL completion times by over 90% using AI-powered chatbots.
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Aviva claims automation efforts saved over $475 million in a single year.
Intelligent process automation maximizes the productivity of claims staff while minimizing delays and fraud. Let‘s now look at how another innovation – blockchain – is transforming claims processing.
2. Blockchain for Automated Claims Settlement
Blockchain brings radical transparency to data sharing through distributed, immutable ledgers. This enables "smart contracts" – self-executing code that trigger automatically when conditions are met.
In insurance, smart contracts are revolutionizing claims settlement by fully automating payouts based on external data.
Here is how smart contracts enable automated claims:
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Terms like payout triggers and amounts are coded into a smart contract by insurer and client.
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Trusted external data feeds called "oracles" are linked, like weather or IoT data.
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When an oracle meets the trigger criteria, the smart contract self-executes the payout instantly.
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No manual intervention is needed for routine claims. Settlement is touchless.
For instance, a smart contract for crop insurance could define a payout trigger and amount based on rainfall measured by a weather station. If the station records drought-level rainfall, the contract instantly settles the defined claim amount without any staff involvement.
Let‘s analyze how smart contracts transform key aspects of claims processing:
Automated FNOL
Smart contracts eliminate the need for policyholders to manually file claims. The predefined contract logic initiates automated FNOL when oracle conditions are met.
Instant Adjudication
Claims adjudication happens automatically based on smart contract terms and oracle data inputs. No document review or policy checks needed.
Accelerated Settlement
Once triggered, smart contracts instantly process payouts through coded business logic. No delays for assessor reviews or fraud analysis.
Reduction in Processing Costs
With touchless claims settlement, insurers save substantially on overhead for routine claims. Customer queries are also minimized.
Enhanced Customer Experience
Policyholders enjoy speedy, predictable payouts without any paperwork. Insurers also avoid dissatisfaction due to delays.
While adoption is still limited, exponential growth is expected as IoT expands. Leading insurer AXA already processes flight insurance claims via smart contracts using flight data.
Smart contracts automate even intricate claims by encoding rules that trigger automatic payouts based on IoT and API data feeds. This eliminates human intervention for processing routine, data-driven claims.
Next, let‘s analyze how another powerful technology – conversational AI – is improving claims experiences.
3. Conversational AI for Claims
Insurers are increasingly deploying conversational agents powered by artificial intelligence called chatbots across claims processes. These bots engage users through intuitive, voice- or text-based conversations.
Here are some of the capabilities of conversational AI:
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NLP Engine: Processes natural language and extracts intent and entities.
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Context Tracking: Maintains context of extended conversations across multiple sessions.
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Integration: Can integrate with insurer systems via APIs to access data.
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Self-Learning: Improves conversing abilities based on real interactions using machine learning.
Now let‘s see how chatbots are transforming different aspects of claims handling:
FNOL Submission
Instead of claim forms, policyholders simply describe incidents to a bot. The NLP engine captures all details rapidly for submission.
Claims Updates
Users can text or speak to amend existing claims through two-way conversations. The bot asks clarifying questions if needed.
Status Tracking
Policyholders can check status just by asking the bot conversationally. It provides updates based on integrated data.
Post-Settlement Support
Bots assist users with common post-settlement queries to reduce call volumes for agents.
Conversational AI results in benefits like:
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33% faster FNOL completion using conversational interfaces per Claimatica.
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38% call volume reduction by providing 24/7 digital-first customer support.
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60% improvement in customer satisfaction scores through fast, transparent experiences.
Given users increasingly prefer conversational interfaces, chatbots are becoming integral for competitive claims processing.
Here are the critical points to remember regarding claims processing automation:
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Manual claims handling results in high costs, fraud leakage and customer dissatisfaction due to delays and complexity.
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Intelligent process automation uses AI to optimize touchpoints like FNOL, document processing, and fraud detection to maximize productivity.
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Smart contracts automate entire routine claims end-to-end by instantly settling payouts when predefined conditions are triggered.
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AI-powered chatbots facilitate natural conversational interactions with users across the claims process for faster and transparent experiences.
The bottom line is that automation enables insurers to handle high claim volumes cost-efficiently while also controlling fraud and delighting users. To drive competitive advantage, carriers must accelerate their automation efforts, especially incorporating conversational AI and smart contracts.
While no single solution addresses all challenges, thoughtfully combining intelligent process automation, blockchain-based smart contracts, and AI-powered chatbots can holistically optimize the claims value chain. Insurers that fail to automate claims risk bleeding profits through rising costs and loss of customers.
If you are an insurance executive looking to transform claims operations in your organization, please get in touch with me. With over a decade of expertise in data extraction and process automation, I can provide strategic advisory for your automation initiatives to maximize ROI.