By David Tweedy, Senior Advisor, Redhand Advisors
The insurance industry is at the brink of going digital, and claims automation is leading the way. A 2019 McKinsey report predicted that approximately 60% of claims will be fully automated by 2030, a revolution we are experiencing in real time.
At the same time, the post-pandemic world contains fewer claims adjusters trying to manage an ever-growing pile of claims. Though the cost of technology is decreasing as the number of digital natives rises, an explosion in claims costs threatens to overwhelm the whole system.
Manual reporting is soon to be replaced with an automated claims process in many cases. Not only does automation increase efficiency and reduce risk, but it leads to dramatic cost savings over time. And it frees up adjusters and expert claims personnel to make the real decisions.
Claims Automation: Where Are We Now?
Many organizations have come to embrace to digital risk management solutions. They currently rely on a variety of tools, from a RMIS with a full suite of capabilities to independent SaaS add-ons, to support their claims processes. These tools provide a certain amount of automation to help streamline the claims process.
Claims automation already benefits businesses, carriers and TPAs in the following ways:
Time savings. One of the greatest benefits to claims automation is time savings through claims resolution. The simplest, most straightforward claims that can be automated in some way, or completely.
For example, consider a fender bender with minor damage to one of the cars. The insurer already knows the cost of the replacement parts and the labor to repair the damage, so the claim automatically pays out when the estimate is under a certain amount. A minor workplace accident could have the same result in which the insurer simply pays out immediately. These claims are so simple and straightforward that it’s not worth the time and money to assign a human to adjudicate the claim.
Reporting. For incidents that require claims be reported to governmental agencies or related organizations, claims automation can assist. When reporting is mandated by the Centers for Medicare & Medicaid Services (CMS) and the Occupational Safety and Health Administration (OSHA), claims should automatically trigger routing to CMS and OSHA.
Early identification of potential problem claims. When organizations have predictive metrics woven into their claims system, notifications can be programmed to alert the claims team when something unusual crops up, such as a lack of witnesses to an accident or a larger payout than expected, they are well positioned to identify problem claims early — and automatically. Based on this information, the technology can predict the level of risk or severity of the claim and direct those high-risk claims immediately to a human. This can be useful for detecting fraud – and it can also provide great service to a customer with a complex case.
1 McKinsey & Company, “Claims 2030: Dream or Reality?” April 2, 2019.
Subrogation of claims. For the insurer, automation can aid in subrogation. For example, when an insured is rear-ended by a third party, the insured files a claim with the third party (or their insurer) to pay for the damage. But if that third party (or their insurer) doesn’t pay in a timely manner, many insurers will just pay for the damage and go back later to collect the money. Again, this takes care of your insured in a timely manner and saves claims adjusters time as well. This process isn’t usually completely automated, but it can help identify problem areas.
Litigation management. A claim that meets certain criteria may be flagged as a “litigation risk,” meaning it’s likely legal action will be taken and a lawyer will get involved. Yet the best way to avoid litigation is simply by handling the claim in a timely manner – something automation is built for. In addition, predictive technology can help claims adjusters prioritize the claims most at risk for litigation, controlling the claim and keeping costs down.
The Next Horizon: Claims Adjudication
With claims automation streamlining insurance processes across the board, it’s no surprise that insurers are looking to completely automate the entire claims adjudication process. This will be more complicated than the basic claims automation already available in your RMIS, which relies on checking certain boxes or selecting a specific answer from a drop-down menu.
To truly automate the entire process, insurers will need to rely on artificial intelligence (AI) to “read” the information and direct it appropriately. This will require more advanced RiskTech solutions, not just a data management system. Risk managers looking to move beyond insurance solutions for mitigating risk would do well to consider these advanced solutions, especially as the AI offerings ramp up.
To learn more about how to integrate claims automation into your RMIS, schedule an inquiry call.