Top 7 Technologies that Improve Insurance Claims Processing

In my decade of experience as a data extraction expert, I‘ve seen firsthand how inefficient legacy claims processes can be. Claims processing is one of the most crucial components of insurance. Done right, it increases profitability and customer satisfaction. Done poorly, it eats up resources and erodes loyalty.

With claims making up 30-50% of insurer costs, optimizing claims through technology adoption is mission-critical. In this article, I‘ll share my insider perspective on the top 7 technologies improving insurance claims processing today.

The Critical Role of Claims Processing

Before diving into the tech, let‘s briefly review why claims processing matters so much. Here are a few key reasons:

  • Customer Service – How claims are handled directly impacts customer satisfaction and retention. 87% of customers consider claims processing an important loyalty factor.

  • Expenses – Claims processing consumes up to 50% of an insurer‘s operational expenses. Efficiency gains drop dollars to the bottom line.

  • Compliance – Incorrect claims handling leads to violations, fines, and litigation. Staying compliant depends on solid claims processes.

  • Fraud – Fraudulent claims account for 10% of insurer costs. Robust claims procedures help identify suspect claims.

  • Growth – Digital claims experiences attract tech-savvy customers. Modern systems position insurers for sustainable growth.

With so much at stake, optimizing claims processing through technology should be a top priority for insurance leadership teams. The following sections reveal technologies I‘ve seen generate big benefits.

1. AI and Machine Learning

AI is revolutionizing manual and repetitive claims tasks. For instance, AI-based optical character recognition (OCR) extracts policy data from documents 10x faster than humans, with 98% accuracy. Additionally, computer vision AI assesses vehicle damage from photos with 95% accuracy in seconds versus an hour for adjusters.

Here are five AI applications that improve claims processing:

Automated FNOL Intake

  • Chatbots with natural language processing gather notice of loss details from claimants.
  • Virtual assistants fill out FNOL forms, understanding spoken details.
  • Accuracy rates for understanding FNOL details can exceed 90%.

Document Review and Data Extraction

  • OCR "reads" scanned claims documents and extracts relevant data.
  • Natural language processing structurally organizes unstructured claims data.
  • This automation accelerates reviews and populates claim systems.

Predictive Analytics

  • AI analyzes large claims data sets unavailable to humans.
  • Models accurately predict claims categories, fraud risks, subrogation potential, etc.
  • Enables smart triaging and prioritization of claims handling.

Computer Vision Damage Assessment

  • AI assesses vehicle/property damage via photos and videos.
  • For vehicle claims, AI matches or surpasses damage appraiser accuracy.
  • Up to 50% faster than manual visual appraisals.

AI-Assisted Investigations

  • AI uncovers claims patterns and provides recommendations to handlers.
  • Augments (not replaces) human investigations.
  • Combination achieves highest accuracy.

In total, AI and machine learning techniques will automate up to 30% of repetitive claims handling tasks by 2030, per McKinsey research. This lets claims staff focus on providing personalized service.

2. Big Data and Predictive Analytics

Mining claims data unlocks actionable insights unavailable through reports alone. Here are four areas where big data analytics aids claims:

Fraud Detection

  • Predictive models identify entities with fraud markers.
  • Social network analysis exposes linked fraud rings.
  • Cutting edge unsupervised anomaly detection reveals novel fraud patterns.

One large insurer detected 25% more fraudulent claims after implementing AI claims fraud analysis, saving over $100 million annually.

Risk Analytics

  • Data mining identifies risk factors impacting claims rates.
  • Enables accurate pricing and underwriting of policies.
  • Results in fewer disputed claims and litigation cases.

Claims Leakage Prevention

  • Analyzing past claims uncovers causes of excess payments.
  • New controls implemented to address problem areas.
  • Leakage reduced by estimated 15-35% for leading insurers.

Litigation Analytics

  • Models predict litigation outcomes and optimal settlements.
  • Quantifies litigation risk profiles of claims.
  • Guides defense strategies and containment of legal costs.

In total, big data and predictive analytics allow insurers to automate processes once driven solely by human judgment. This boosts efficiency, reduces leakage, prevents fraud, and improves customer service.

3. Internet of Things (IoT) Sensors

Networked IoT sensors provide instant digital notice of claim events, accelerating response.

Home Sensors

  • Smart home sensors (smoke, water, security, etc.) identify covered losses.
  • Directly transmit incident details to insurers via IoT connectivity.

Telematics

  • Connected car sensors log accident telematics for liability assessment.
  • Data includes speed, location, g-forces, airbag status and more.

Wearables

  • Smart watches with fall detection alert insurers of potential injury claims.
  • Details like GPS coordinates captured instantaneously.

One home insurer saw claims cycle times drop by 20% after implementing smart home FNOL sensors.

IoT automates initial notice of loss details, eliminating policyholder reporting delays. This results in faster claims resolution, improved customer satisfaction, and lower processing costs for insurers.

4. Drones

Drones provide aerial views that optimize claims investigations and property assessments.

  • Inspect rooftop damage across entire neighborhoods quickly.
  • Digitally scan accident scenes to reconstruct liability details.
  • Identify hidden moisture damage not visible from the ground.
  • Validate suspicious claims by inspecting reported damage areas.

Drones complete site inspections in a fraction of the time required manually. For catastrophic events like hailstorms, drones assess hundreds of roofs in hours versus weeks on foot.

One major insurer expects to save over $150 million annually on auto claims through accelerated processing times enabled by drone accident site scanning.

Drones add visibility to accelerate and enhance claims investigations and assessments, improving cycle times and loss analysis accuracy.

5. Blockchain

Blockchain‘s distributed ledger brings new levels of automation, security, and transparency to claims processing.

  • Fraud Reduction – Asset pre-loss images hashed to blockchain validate damages.
  • Automatic Claims – Smart contracts instantly pay valid claims triggered by events.
  • Subrogation – Indelible loss records aid subrogation recovery.
  • Auditing – The immutable ledger improves regulatory reporting compliance.

One leading reinsurer reduced fraudulent claims by 15% using blockchain validation of weather events tied to crop insurance claims.

Blockchain infrastructure automates manual claims steps involving information exchange and reviews. This reduces friction, human error, and processing costs for insurers.

6. Digital Communications

Digital messaging eliminates paper-based claims processes, accelerating cycle times.

  • Email – Instant document exchange without postal delays.
  • SMS Updates – Real-time status notifications to claimants.
  • Video – Virtual inspections and interviews optimize workflows.
  • Digital Payments – Fast, direct payments improve claimant experiences.

Transitioning from postal mail to email for key claims documents accelerates case resolution by over 50% according to studies by leading industry groups.

Digital-first communications meet claimant expectations for speed and convenience while optimizing insurer processes.

7. Mobile Apps

Custom-built insurer apps modernize client and employee claims interactions.

Policyholder Features

  • Instant FNOL submission from smartphones.
  • Real-time claims status and payment tracking.
  • Document upload and estimates approvals.
  • Location verification of claim events.

Employee Features

  • Tablet tools for field claims staff.
  • Integration with core claims management systems.
  • Productivity-enhancing workflows and checklists.
  • Paperless mobile capabilities.

Policyholder satisfaction scores for a top insurer improved by 40% after launching an integrated claims management mobile app.

Mobile apps provide on-demand, self-service access benefiting clients and claims staff alike. Apps are now considered "must-have" functionality by policyholders.

The digital claims technologies explored will drive end-to-end transformation of insurers‘ claims processes and systems over the next decade. Early adopters will gain a substantial competitive advantage. Laggards risk rapidly losing market share.

While exciting, leading industry change versus following requires focus and investment. Based on my experience, here are best practices for accelerating digital claims:

  • Take an enterprise approach spanning people, processes and technology.
  • Communicate the "why" of transformation to build buy-in.
  • Prioritize changes delivering maximum value and impact.
  • Invest in internal digitization skills and leaders.
  • Monitor KPIs aligned to claims processing goals.
  • Regularly re-optimize to maintain momentum.

For many insurers, engaging expert partners is prudent to benchmark capabilities, craft digital roadmaps, and deploy innovations. With the right vision and expertise, carriers can seize the immense opportunities of claims digitization to reduce costs, improve service, prevent fraud and position their organization for the digital future. The time for action is now.

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