Process mining is rapidly emerging as a must-have capability for insurance companies seeking to optimize operations, reduce costs, and improve customer experience. By providing complete visibility into processes, process mining enables insurers to identify inefficiencies, compliance issues, and automation opportunities.
In this comprehensive guide, we‘ll explore the top use cases and best practices for applying process mining in insurance.
An Introduction to Process Mining
Process mining is an analytical technique that reconstructs end-to-end business processes from event log data extracted from IT systems. It shines a light on how processes really operate, revealing bottlenecks, deviations, waste, and optimization potential.
For insurance companies, process mining provides:
- Visibility into core processes like underwriting, claims, policy admin
- Pinpointed process inefficiencies and waste
- Ensured compliance with regulations
- Earlier fraud detection
- Discovered automation opportunities
- Benchmarking of process KPIs over time or against peers
- Enabled process transformation initiatives
Let‘s explore some of the top use cases and benefits of process mining for insurers in more detail.
Top Process Mining Use Cases for Insurance Firms
1. Map Risk Assessment/Underwriting
Accurately assessing risk levels is critical for pricing insurance policies competitively. Flawed underwriting risk models can result in loss of customers or underestimation of exposures.
Process mining gives insurers total visibility into the end-to-end underwriting process. This helps uncover gaps in current risk assessment practices. Insurers can then improve risk rating models to more precisely align premiums to risks.
For example, a commercial insurer used process mining to find that risk assessment for small business policies was inconsistent across regions. By optimizing this process, they reduced loss ratios by 5 percentage points within a year.
2. Ensure Compliance
By comparing as-is processes against prescribed policies and regulations, process mining highlights areas of non-compliance and validates that internal controls are working.
This is invaluable for meeting regulations such as Solvency II for European insurers. Solvency II has stringent requirements around governance, risk management and regulatory reporting. Process mining helps provide the data needed to prove compliance.
For publicly-traded insurers, process mining enhances SOX compliance by monitoring key financial processes for control gaps. This improves auditability and reduces compliance costs.
According to a McKinsey survey, 86% of insurers say process mining is useful for regulatory compliance.
3. Ease Fraud Detection
Insurance fraud costs the industry over $40 billion annually in the US alone. Process mining enables earlier fraud detection by monitoring processes and customer behavior data to quickly identify suspicious patterns.
For example, by analyzing claims handling processes, an insurer discovered a claims assessor bypassing standard verification steps. Process mining‘s overhead view can reveal fraudulent processes that may be intentionally hidden.
4. Accelerate Claims Processing
Lengthy claims processing reduces customer satisfaction and loyalty. Process mining analyzes causes of delay in claims handling to streamline workflows.
According to an EY survey, 86% of insurers say process mining helped reduce claims cycle times. Insurers have used process mining to decrease claims processing times by 30% or more in some cases.
Process mining also reveals opportunities to automate repetitive claims steps via RPA or AI. This increases throughput and consistency.
5. Reduce Quote-to-Bind Ratio
A high quote-to-bind ratio means losing leads and revenue. Process mining uncovers inefficiencies causing customer drop-off during quoting and binding.
For example, it may reveal communication channels that customers rarely use, or manual bottlenecks in analytics processes. Fixing these can dramatically improve quote conversion rates.
6. Optimize Back Office Operations
Applying process mining to back-office functions like finance, HR, and IT improves workflow and cross-departmental collaboration. Inefficiencies between front and back-office processes are easily identified.
According to research by Mordor Intelligence, 73% of insurers use process mining specifically for back-office process improvement.
7. Discover Automation Opportunities
Process mining pinpoints processes ripe for automation, helping insurers boost efficiency. Many leading insurers use RPA bots to automate repetitive claims handling steps.
For Zurich Italy, RPA bots process 60% of simple claims end-to-end, reducing settlement times from days to hours. AI is applied to auto-categorize claims based on free-text descriptions.
Chatbots like Allstate‘s or Lemonade‘s AVA speed up customer communication for common inquiries. Process mining helps identify the highest ROI automation opportunities.
Best Practices for Implementation
To successfully apply process mining, insurance firms should focus on:
Identify Goals and Required Tasks
Clearly define the objectives process mining should achieve, and specify required tasks. This ensures data collection and analysis focus on business goals.
For example, one insurer sought to reduce simple task times. But "simple tasks" needed to be redefined based on revenue thresholds to properly collect data.
Improve Data Quality
Insurance data can be inconsistent or incomplete. Invest time in data preparation and cleaning to achieve accurate process mining results.
Set Filtering Criteria
Establish filtering rules tailored to your questions and data quality. This avoids misleading outputs.
In our simple tasks example, the insurer first filtered by time but got inaccurate insights. Switching to filter by revenue enabled meaningful analysis.
The Time for Process Mining is Now
Process mining delivers tangible benefits, including lower costs, improved customer satisfaction, and increased competitiveness. To keep pace with insurtech disruptors, incumbents must make process mining an operational capability integrated into day-to-day business.
The proof of concept stage is over – it‘s time to fully embrace process mining across the enterprise to transform digitally.
Next Steps
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Check out our guide comparing top process mining tools.
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Learn more process mining use cases for banking and finance.
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Reach out if you need help implementing process mining in your insurance organization. My team of process optimization experts can partner with you on your process mining journey.
Process mining unlocks immense potential for insurance leaders willing to embrace it. Let me know if you have any other questions!