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The Risk of an Inefficient Claims System

Claimants aren’t satisfied with the claims process. As a result, many claimants plan to switch carriers, and insurers stand to lose billions of dollars in the coming years. For any insurer still using an inefficient claims system, this should serve as a wakeup call. The time to overhaul your claims system has arrived.

$170 Billion at Risk

Insurers that provide poor claims experiences risk losing $170 billion in premiums over the next five years. That’s the conclusion of a report from Accenture called Why AI in Insurance Claims and Underwriting?

The report used surveys of more than 6,700 policyholders and found that 31% of claimants were not fully satisfied with their home and auto insurance claims experience over the last two years. Among this group of dissatisfied claimants, 30% said they had switched carriers, and another 47% said they were thinking about doing so. That’s 77% of unhappy claimants who either have already left or are thinking about leaving, and it could present $170 billion in lost premiums over a five-year period.

AI Is the Solution

The report from Accenture didn’t just identify the problem. It also identified a solution: AI. AI can be leveraged to boost customer satisfaction and retention.

Many claims processes suffer from gaps in communication and tedious tasks that eat up the claims handler’s time. AI can help. With AI, updates can be sent out automatically, keeping the policyholder informed of key developments without requiring any action from the claims handler and ensuring that no messages slip through the cracks. AI can also automate tedious tasks, such as populating common forms, thereby freeing up the claim handler’s time and allowing the claim handler to focus on other matters. Efficient automated claims systems can easily save 2 hours per file handler per day.

AI Doesn’t Replace the Human Touch

When you’re dealing with a problem, sometimes you just want to be able to speak to a person. According to First Orion, 49% of customers prefer speaking with a live person when they contact their insurance providers. Similarly, Nationwide surveyed customers and found that 58% of customers want to be able to reach an agent or claims representative over the phone.

But that’s not all the Nationwide learned from its survey. The survey also revealed that 36% of customers want a digital claims tracker and 74% want to have their claims handled quickly.

AI doesn’t replace the need for human agents. When customers are having a problem with their claim, they want to be able to reach a real person. However, human interaction isn’t always needed. People also appreciate the ability to track claims progress on their own. Most importantly, they want a fast resolution. AI helps by supporting both the claimant and the claims handler. Claimants can use AI-support programs to check their claims status and receive automated updates. Claims handlers can rely on AI to speed up the process and automate time-consuming but tedious tasks. That way, when a claimant needs their time, they can provide it.

Technology Is Changing Everything

As technology changes, expectations for insurance claims services change, too. With the rise of email, texting, online shopping and digital banking, wait times that seemed reasonable before can start to seem painfully long. This means that companies cannot afford to tread water. If they don’t move forward, they’ll drown under new customer expectations. Progress is the only solution.

According to World Economic Forum, innovations like the Internet of Things and mobile technology have changed everyday experiences. Because of the digital revolution, organizations need to meet customer expectations and compete with both rivals in the same industry and best-in-class companies in other industries.

Some companies are getting it. Others aren’t. Companies are adopting AI and other technologies at different rates, and there’s a big difference in the results. According to Accenture, the technology leaders are growing up to five times faster than technology laggards.

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Are You a Laggard or a Leader?

Your company has no doubt embraced some forms of technology. This doesn’t mean you’re a leader in technological innovation.

If you’re using an inefficient claims system, that’s a big problem, and it’s not the sort of thing you can just slap a bandage on and pretend it’s fine. You need a major change. Real digital transform isn’t just a piecemeal adoption of one technology here and another there. It’s a complete overhaul of your company’s workflows and operations.

If you don’t do it, your competitors will.

Let’s go over Accenture’s recent findings again to consider the true implications. Accenture found that many claimants are unhappy, and that around three in four of those unhappy claimants may switch to another carrier. As a result, carriers could lose $170 in lost premiums over a five-year period.

Customer churn is a problem for insurers – but it’s also an opportunity.

People may not always like dealing with insurance companies, but most accept the necessity of homeowners and auto insurance coverage. When they leave one insurance company, that company loses the premium. However, that’s not the end of the story. The customer still needs insurance coverage, so presumably they’ll get it from another insurance company. That company will gain the premium amount.

If carriers are at risk of losing $170 in premiums, carriers also have the opportunity to gain $170 in premiums.

How Customers Select a New Insurer

Although insurance companies can expect to gain some customers while losing others, they shouldn’t assume that these two groups will cancel each other out. A company that offers a superior claims experience may lose few customers while gaining many, resulting in significant growth. Meanwhile, customers who provide a substandard claims experience may see a lot of customers leave while struggling to attract new customers.

Cost can be a big motivator, but it’s not the only reason people switch insurers. According to ValuePenguin, 47% of people who decided not to switch auto insurers at their most recent policy renewal said it was because their insurer offered the lowest rate, but 35% said it was because they liked the customer service.

When customers decide to explore their carrier options, they’ll probably get some quotes. They might also check reviews. The internet has made it incredibly easy to check for bad reviews and online complaints, and many people take this information very seriously when deciding whether or not to use a business. According to Think with Google, 53% of shoppers say they always conduct research before making a purchase.

If you’re providing a poor claims experience, you could lose customers and their premium. You also risk negative reviews and online complaints, and that reputational damage could make it harder for your company to attract new customers.

Making the Right Investments

Most insurers know that they need to invest in technology. The only question is which investments will provide the greatest return.

Although there are a lot of competing concerns, the claims experience has to be a priority. Poor claims experiences drive policyholders away and lead to reputational damage, and that’s on top of the added costs associated with long, overly complicated claims processes.

A more efficient claims system can improve customer satisfaction. It can also result in cost savings. To see how much you could save by switching to VCA Software, use our quick ROI Calculator.

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