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Technology-Enabled Insurance Claims Transformation is in Sight

Stephen Applebaum | July 13, 2015

While the insurance industry is experiencing an accelerating rate of change across the entire enterprise—much of it driven by technology and seismic consumer and market shifts—the area in which we expect to see the most disruption through 2020 and beyond is claims, including its information systems and vendor services supply chain partners. 

Claims is ripe for transformation because;

  • In general, claims had not traditionally received its proportionate level of resources and has therefore lagged in adopting and leveraging new technologies and characterized by labor intense and inefficient processes
  • Claims represents such a large and visible proportion of carrier cost that it is ripe for transformation through technology-enabled process redesign
  • Claims is the one department that has the greatest opportunity to provide the type of customer service and engagement that can lead to customer retention—valued highly in the hyper-competitive insurance marketplace

Mobile claims self-service, advanced analytics, aerial inspection and automated as well as predictive estimating technologies have already begun to transform and compress higher cost analog claims processes and more technology solutions seem to come to market almost daily.  Looking ahead, the rapidly emerging Internet of Things—including connected cars, homes, property and people—is poised to further transform insurance claims, risk management, product development, and marketing as successful carriers leverage myriad opportunities to mitigate risk, respond to claims, and personalize customer product design and engagement in real time.

The property and casualty insurance claims ecosystem is still comprised of thousands of small local and independent firms as well as a few larger regional, national, and global vendors and business partners who provide mission-critical products and services to the claims operations of the property & casualty insurance industry.

Managing and interfacing with such large numbers of vendors by an insurance industry seeking to streamline, standardize and compress the claims process is counterproductive and therefore consolidation among these vendors—fueled by investors attracted by the promise of generous returns and enabled by technology—has already begun and will accelerate.

Personal lines claims operations, the largest segment in P&C, including its collision repair and property partners, primarily rely upon the products and services of a few large claims information providers, each of which have been expanding their technology-enabled offerings deeper into broader automotive, property and casualty markets.

Over the next several years we expect these information providers to continue to expand in several directions through internal product development supplemented by strategic acquisitions.  This expansion will likely include:

  • Deeper integration with claims management core software systems
  • Introduction of new tools and services utilizing advanced analytics, big data (including the Internet of Things which includes telematics) for use cases across the entire auto and property claims process
  • Deeper and wider integration with third-party companies in the auto and property claims supply chain, specifically including collision and mechanical repair parts
  • Use of massive amounts of claims and vehicle data to develop and support a large number of auto, property, and casualty claims underwriting and marketing use cases
  • Further development of auto casualty and workers’ compensation medical management networks and services and related cost containment solutions
  • Development of commercial claims information system and data management solutions, including integration with connected devices in the Internet of Things

However, the traditional insurer-repairer business model, which is based on an electronic estimate exchange process, is likely to be transformed within the next several years and supplanted by a process driven by mobile technologies coupled with predictive analytics. This will reduce and eventually eliminate the need for repairer-carrier estimate exchanges for an increasingly higher percentage of claims.

Another significant development in the supply chain is the emergence of electronic parts procurement and e-commerce solutions in the $15 billion U.S auto repair parts supply chain. The collision repair parts industry, once one of the most fragmented of all, and until recently characterized by numerous local, independent vendors and competing parts search and procurement platforms, will continue to consolidate in the hands of just a few well-capitalized, highly-experienced and strategically-positioned parts logistics, information and software providers. 

Stephen Applebaum is managing partner, insurance solutions group and senior advisor for StoneRidge Advisors.

 


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