With wildfires already underway in Arizona and California and Hurricane Elsa perhaps headed towards the U.S. eastern seaboard, we thought it was a good time to bring back one of our most read articles on how insurers can reimagine the claims process to serve their customers better and protect their bottom lines. Originally published in late 2019, this article explores how AI is driving that change and how insurers can get started on this journey.
Each time a natural disaster strikes in a community, policy holders start the process of what can be a lengthy claims process. While many claims are resolved in a timely fashion, there are there are number of claims that take many days, if not weeks, to be paid and resolved. According to Praveen Reddy, Chief Information Officer & Head of Operations at Velocity Risk Underwriters, the lengthy and obtuse claims process is about to become an artefact thanks to artificial intelligence (AI). “AI is driving change in a number of areas for the insurance industry, but in the area of catastrophe claims, it’s delivering meaningful change with greater efficiencies today,” he shared in a recent conversation.
For Reddy and his team at Velocity Risk Underwriters meaningful change translates into improving the customer experience by refining business operations using AI behind the scenes. “While we’re obviously invested in growing our business, that can’t be done at the expense of our customers’ experience working with us during an extremely stressful time,” Reddy said. “AI speeds up the claims process by enabling us to break down silos of information and put all the data we have to work for the benefit of our customers.”
From a business perspective the power of AI to reduce costs enables re-investment in the business, which delivers additional benefit and value to the customer. Meanwhile from a customer’s perspective AI speeds the claims process and enables them to return to their homes and back to normal far more quickly after a catastrophic event, such as a hurricane, fire, or flood. “Insurance companies don’t start out with the intention of processing claims slowly,” Reddy noted. “However with the amount of data that needs to be gathered, analyzed, and applied in order to adjudicate a claim accurately, it simply hasn’t been possible until now – with the incorporation of AI – to move more quickly.” The ability to process claims more quickly and maintain accuracy, as AI enables, will become more important as the number of claims from natural disasters continue to rise.
In other words, if the claims process isn’t reimagined those hundreds of thousands of unpaid claims could quickly grow to millions with unintended impacts on economic productivity and personal and community well-being. But how exactly does AI improve the claims process and speed the time to resolution?
“At this point, it’s best to apply AI to areas where it will have greatest impact,” shared Venkatesh Srinivasan, Venture Leader for Cognizant Property Insights. Srinivasan explained that at present AI can be used to improve processing for about 40 to 50 percent of claims in an event like a hurricane, by primarily being used to assess exterior damage to a structure without needing to have an adjuster on site to document and report the claim. “Obviously it’s difficult to adjudicate a claim for interior damage remotely, but where we’re looking at damage to the exterior of a house, or the roof of a structure, we can do that remotely.”
By being able to document and review catastrophe claims remotely an underwriter can reduce the time to process a claim from 4 weeks on average to 5 to 10 days. “The principle time savings come from not needing an adjuster to travel to numerous sites, write multiple reports, and then process those reports back at the office,” Srinivasan explained. An added benefit of being able to speed the time to resolution is the reduction in litigation. “Assignment of benefit litigation has grown exponentially in Florida, in particular, as insurers have failed to resolve claims in a timely fashion,” said Srinivasan. “If an insurer can adjudicate and settle a claim in 5 to 10 days there’s less opportunity for an assignee to claim they have been underpaid and pursue legal action, which is another benefit for insurers as they look to manage costs.”
How, then, would an insurer get started on using AI to deliver meaningful change to the claims process?
“It’s essential to identify a specific use case,” shared Reddy. “You have to pick a focus area based on a business case and the return on investment it will bring to your business. Given that we’re in the catastrophe insurance business, our strongest use case was in claims.” From there, Reddy recommended building a cohesive team of stakeholders who will buy-in to the project, make resources available, and be able to drive through pockets of organizational resistance. But what is equally important is having the right technology partner to provide insight and guidance throughout the initial stages of the use case, as well as for the long term. “For us the right partner was Cognizant. Inevitably, because you’re undertaking something innovative with new technology there will be plenty of down cycles as well as the victories. When we did hit a failure, Cognizant was there to help us fail fast and move forward quickly to success.”