Expanding data volumes from sensors and other connectedtechnology, intensifying regulation, increasingly volatile weatherpatterns — these are among the powerful forces reshaping the insuranceindustry.

Their effect on the claims function certainly will be profound.Nearly every link in the claims process will evolve in the futurethanks to:

• Technological innovations (such as roboticprocess automation and driverless cars).
• Significant shifts in claims volumes (less,but more unpredictable, claims).
• Changing customer expectations (more digitalengagement).

There's little doubt that tomorrow's claims organization willlook and act differently. Smaller, leaner teams will rely ongreater automation to focus on higher-value activities. Robustdigital channels will handle most low-complexity claims (especiallyin personal lines).

New tools and technology

New tools and technology will take over activities currentlyperformed by loss adjusters, eliminating the need for in-personproperty or vehicle damage inspections, for example. Proactive lossprevention, especially in the areas of fraud, data breaches andcybersecurity, will be a top priority.

Analytical thinking and complex adjusting skills will be at apremium as data volumes and complexity increase dramatically thanksto:

• The Internet of Things, including factory andhome sensors and telematics systems on cars and trucks.
• Social media data that provides real-timeinformation about claims severity and localization and helpsprevent fraud.
• Drones used to remotely inspect damage andcollect data for underwriting purposes.

It's possible that retail and personal insurers will reducetheir employee base by up to 50 percent, with commercial specialtyinsurers seeing smaller reductions. Remote working and new sourcingarrangements across complex claims supply chains will reduce realestate costs. Special response units and global catastrophe teamswill manage surges and spikes in claims volumes due to increasinglyfrequent weather events and natural disasters.

In early 2016, EY's insurance group conductedresearch to better understand how industrystakeholders — including senior insurance executives, financialtechnology (FinTech) leaders and analysts — view the future ofclaims operations. They identified six major disruptive forces thatwill define the future of claims:

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Insurance claims will decrease as technology helps mitigaterisks for insureds. (Photo: Shutterstock) 

1. Decreasing claims volumes

Claims frequency is falling in many lines of business thankslargely to sensors. Improved safety features (like driverassistance and airbags) have greatly reduced the likelihood of autoaccidents. In fact, from 1994 to 2014, there was a 39.2 percentdecrease in the number of total reported road accident fatalities,according to the U.K. Parliament. Sensors for monitoring homes andbusinesses are having a similar effect.

Updated technology provides new opportunities forinnovation, reduces fraud and streamlines workflows. (Photo:Shutterstock)

2. Modernized technology

Better technology means more opportunity for innovation. In thefuture, the vast majority of simple claims (e.g., those less than$1,000) will be settled through automated, rules-based processes,provided that no fraud indicators are present. The simplerproducts are, the more automated the claims validation process canbe.

Modernized claims platforms will enable the capture of moredata, as well as more precise segmentations. Streamlined workflowswill also enable higher levels of productivity because leaner teamswill be able to process more claims. Robotic process automation, inparticular, will help alleviate the long-standing talent shortagein claims.

Sensors collect data that can be monitored remotely andallows insureds to be proactive in reducing the risks in theirhomes. (Photo: iStock)

3. The sensor revolution

With more devices linked to the ever-growing Internet of Things,closer and more effective monitoring of homes, businesses andindividual behavior has become a reality. And it has shifted thefocus of claims organizations to proactive monitoring and away fromreactive handling processes.

New data sources will be focused on loss prevention and incidentmanagement in all lines of business. Insurers must invest incybersecurity to protect the larger and more valuable data setsavailable to them.

Information from multiple sources can now be personalizedand sent immediately to a customer's phone to mitigate risks.(Photo: iStock) 

4. Digital disruption

Companies such as Uber and Amazon are redefining customerexpectations in terms of service interactions, personalizedproducts and efficiency. The customer experience bar is now higherin all industries, including insurance. Within claims, that meansbetter self-service tools. Accurate, timely and transparentinformation about claims status will be shared or "pushed"proactively to customers and made available through onlinechannels.

Many commercial and corporate clients still turn to brokers foradvice, meaning claims service likely is to become a keydifferentiator. But, in other lines, superior customer service willbe associated with the ability to meet customer preferences, ratherthan the level of human interaction.

Improved risk management tools will further reduce thenumber of claims insurers receive. (Photo: Shutterstock)

5. Better enterprise risk management

Large businesses have vastly improved risk managementcapabilities because of the wider scope and more stringent healthand safety regulations and a greater focus on the return fromcapital, including insurance arrangements. Better data about claimsincidents and clearer insight into the cost of risks are likely todecrease the overall claims volumes from large commercialpolicyholders.

Advanced technology will be able to warn insurers andpolicyholders of severe weather, but flooding will continue to be amajor risk. (Photo: Shutterstock) 

6. Severe weather 

The increased frequency and often localization ofweather-related events mean significant flooding is likely tocontinue to be a major issue. Claims operations will needinnovative technology for advanced warning of such events andoperational flexibility to scale up quickly to meet demand spikes.Management of such severe incidents will soon become abusiness-as-usual activity for claims.

The insurance industry is changing faster than at any time inits history and technology is a huge driver as insurers work tomeet and exceed the expectations of their customers. These changeswill impact all aspects of the industry for years to come and theresult will be an even more dynamic business for those willing totake advantage of these opportunities.

Nicole Michaels is a principal in the insurance advisorypractice at Ernst & Young. Email her at [email protected].

Related:

In claims, all roads lead toinnovation

8 trends in insurer digitalmodernization

Innovations coming to insurancepayments

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