When it comes to innovation and technology, the commercial insurance industry has a lot of room for growth (as discussed in Leveraging insurance technology for speed and customer engagement).
In contrast to the personal lines insurance class of business, the commercial sector has accomplished less technological advancement over the last 10 or 20 years. Personal lines insurance features more elements of modern technology (including AI and machine learning), as the commercial side continues to lag behind.
That is not necessarily for a lack of trying. Sometimes within the insurance industry – and other industries, for that matter – attempts to introduce technology are doomed by design flaws or issues with implementation or integration. In other cases, the technology proves to be effective, but the user simply does not want or need it. There is a resistance to change.
In some instances, the technology is to be deployed in the back-office settings, and external customers never see it, so its value isn’t as obvious. And sometimes the technology improves the customer experience but weakens the insurance company’s overall processes.
The current landscape presents the risk of technology overload. Many companies are attempting to utilize too many different forms of innovation because they sound exciting or because it’s the trendy thing to do, but the technology avalanche often makes life harder for employees and/or consumers. A bit like the dot-com era, everyone had an e-commerce, social media or internet idea, but many of the ideas proved to be overwhelming, and many of them failed.
There continues to be much work to be done on this front. In particular, the claims settlement portion of the commercial insurance industry has a long way to go. Much of the technology in insurance is focused on the sales, product development and distributions channels. The claims experience is an afterthought. But it’s the claims experience that really puts the company to the test. The policy or insurance product may sound and look great on paper (or, more likely, on screen), but the real test of its value comes when the policy is triggered and the policyholder expects a response.
At the moment, a commercial claims process could easily take three to four months to get resolved. Longer for more complex claims. An incident occurs and a claim is filed. The insurer is informed and they get back to the insured in a few days. And so begins the exchange and the claims clock starts ticking. Each stage of this back-and-forth dialogue can take days, or weeks, and sometimes a lengthy dispute can arise before a final resolution. Ultimately it could be months before the business receives its settlement money.
That, of course, is not ideal for a company that has just experienced a major loss due to a flood, a hurricane or some other significant event. It’s even more problematic for a business with slim margins, tight cash flow and/or a small or medium-sized balance sheet. Companies want and need their claims to be settled quickly. They need that cash injection to start the business recovery process. They want to move on. They need to get back to business.
With new claims technology – such as Quantum, Baker Tilly’s new digital claims calculation platform – that three to four month process potentially can be reduced to weeks, or days in some cases, getting checks paid to business owners much faster. When it comes to claims settlement times and the related emphasis on customer service, this type of technology could be a key differentiator for insurance companies trying to attract and retain customers.
In fairness, there are various technologies already successfully being used as part of the insurance claims process. Some of these include water sensors in buildings that measure the height of flood waters with payments automatically made based on whether a certain height is reached (i.e. a parametric trigger), and temperature sensors to monitor oven or refrigeration temperatures, again aimed at confirming a loss event and issuing insurance payments. Additionally, we see the use of drones with cameras to survey damage areas, and even video calling where owners can virtually walk insurance professionals through the property to see the damage.
Like with most technologies, however, there can be an element of uncertainty or room for interference or malfunction. Technology solutions like these may work 90% of the time. But in the other 10% of cases, a claim can be highly subjective, requiring more of a human touch.
When insurance companies make decisions about technology, it is important to understand that modernization is not an easy process. It requires change, which is not always simple or comfortable – particularly when many stakeholders are involved. It’s especially hard to implement that change proactively to plan for the next evolution of the insurance business. It’s easier to implement changes when a very direct need can already be identified, but this is of course reactionary.
Developing a change management plan is a critical step to introducing technology or modernization into a company. Key stakeholders representing various groups from across the company and the customer base need to be involved or represented in developing the plan to implement change successfully.
Technology and modernization are imperative to help insurers keep pace with each other – and with other industries. But on the other hand, many employees and consumers do not want change or another new technology to deal with. Many of us are creatures of habit, both personally and professionally, while others are desperate for a simpler, faster claims process. The tricky part then is to balance these seemingly opposing needs and challenges to improve the process for the success of the company.
So, any new advances in technology need to be aimed at achieving specific value-added goals. Introducing innovation just because it’s newer will ultimately have a high likelihood of failure, crushing the investment promises set out at the start. Those specific qualities can be valuable to insurance customers, but don’t assume that you can solve all their (or your) problems at once.
Achieving perfection is impossible. Even advancements take time.
The best steps that insurance companies can take is to get the right people involved, to value and understand their customers’ wants and needs, to beware of perfection and to be proactive in selecting how and where to modernize. If there is one thing we’ve learned in the last 18 months, it’s that insurance companies need to spot the opportunities technology can bring and enable them to be ready for anything. As they adapt to a changing industry environment, technology at all stages of the insurance transaction play a critical role.
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