Claims is by far a property and casualty insurer’s biggest cost component, as paid losses combined with investigative and settlement expenses accounted for around 70% of US premiums collected in 2020.1 The pressure is always on to augment claims processing with new technologies and data sources that can increase efficiency, productivity, and accuracy, since every dollar saved goes straight to the bottom line. This transformation was greatly accelerated during the pandemic as necessity became the mother of reinvention, prompting implementation of widespread digital and virtual claims handling practically overnight. (See sidebar, “Pandemic forces faster digital transformation.”)
However, interviews with chief claims officers (CCOs) from a dozen large and midsized personal and commercial lines carriers in the United States, Canada, and the United Kingdom found most walking a tightrope between the drive to divert more claims to automated systems and the overriding need to maintain a human touch at the moment that matters most to policyholders.
This isn’t an either/or choice between technology or people. Insurers should continue bolstering their data sources and technology infrastructure to settle claims faster, more accurately, and at lower costs, while also upskilling their claims professionals. That way, they could maximize the value of all the newly integrated technology and data available while still being able to curate a personalized customer experience.
The challenge facing insurers is how to effectively integrate these two sides seamlessly, so that they may deliver the right service at the right price point to the right claimant at the right time, with the goal of satisfying customers across a wide range of expectation levels.
Indeed, customers do pay close attention to an insurer’s claims handling reputation. A personal lines consumer survey by Deloitte found that 44% of US respondents conduct research into what it’s like to make a claim with a particular auto or homeowners insurer before buying coverage—while an even higher percentage do so in China (79%) and Australia (58%).2 The fact that a claim may be the only touchpoint a customer has with an insurer can make this element crucial to retention and growth.
This report focuses on how CCOs might overcome such challenges in transforming their operation, balancing the benefits of automation and more advanced technologies with customer demands for personal service. To accomplish this, insurers should look to raise the game of field adjusters, fraud investigators, claim file handlers, customer service representatives, and other essential claims department personnel to exponential levels (see sidebar, “What exactly is an ‘exponential’ claims professional?’’).
Advanced technologies and new data sources should increasingly supplement and augment (but not necessarily replace) adjusters, managers, fraud investigators, and other claims professionals. These advances should relieve them from many labor-intensive yet low-value tasks, while arming them with tools to speed up case resolutions and payments. This should also improve outcomes and customer satisfaction.
Exponential claims departments and professionals should therefore have (i) the training and skills to manage and audit automated results on a case and portfolio level, (ii) the judgment to quickly determine which tools and data might best serve a particular claim, (iii) the ability to strike a balance between automation and the ongoing need for human engagement, and (iv) the opportunity to offer value-added services internally and externally.
Source: Analysis by Deloitte Consulting LLP and the Deloitte Center for Financial Services.
The pandemic vastly accelerated claims transformation plans among those insurers participating in this research. A number of carriers noted that the percentage of claims being handled virtually (often with imaging technology over mobile apps) and digitally (with automated straight-through processing) skyrocketed last year from single digits to as high as 55% at one personal lines insurer interviewed. Meanwhile, J.D. Power’s 2021 US Property claims satisfaction study found that carrier acceptance of customer photos and videos for settling claims grew from 61% in early 2020 to 68% during the pandemic.3
“We were already on a journey to a digital operating model that would offer a host of self-service solutions and really simplify the claims process for our people and customers alike, but we hadn’t made all that much headway before the pandemic,” admitted one personal lines CCO. “But then the pandemic came along and eliminated the adjustment period we budgeted (to make the transition), so instead of taking two or three years, we had to complete that journey in a few weeks and months. I wouldn’t have thought that was possible before we actually did it.”
It also seems very unlikely that insurers can or even will want to put this digital genie back into the bottle. “We absolutely want to keep what we’ve done in place and build on this postpandemic. There’s no turning back,” said one large commercial lines CCO who launched a virtual estimating platform in 2020 on a vastly expedited time frame.
However, this same CCO added, “while we’ve managed to digitize half our claims, how do we maneuver through the other half that are more complex and defied a technological solution? Can we somehow simplify more of those enough to handle digitally so we can keep scaling up? I think that's the final frontier for these innovations.”
Today’s tech-savvy customers are increasingly seeking greater convenience, faster turnaround time, and more self-service options—expectations that insurers are attempting to meet with mobile apps, virtual appraisals, and straight-through processing of more routine claims, among other innovations.
These technologies should free up staff from routine tasks across the claims value chain. For example, with intake and triage, the use of live virtual inspections, photo estimating software, and automated repair shop scheduling can create a digital pathway to contactless claims. The same goes for drones and satellite imagery, which may permit detailed assessments of widespread catastrophe zones or damage to a single home or business without having to waste time sending live adjusters to the scene, often under hazardous conditions.
Such technological enhancements can make a big difference in turnaround time and customer satisfaction. A report from J.D. Power found that for homeowners claims processed digitally, including online filing of first notice of loss and acceptance of the insurer’s digital damage assessment, the time to payment was reduced by up to 5.5 days, compared to those who didn’t file their claim online along with photo proof of damage.4
At the same time, these technology tools are likely to change the day-to-day work and responsibilities of claims professionals in fundamental ways (figure 1).
However, these new tools will do little good for insurers or their customers unless claims professionals are trained to derive the most value from them and are prepared to handle more challenging tasks after automation relieves staff of routine data gathering and administrative work.
Many might be repurposed to higher level data analysis—for example, in managing portfolios of risk rather than individual claims. Others could focus more on fraud detection, coverage analysis, and dispute resolution for outlier claims. And rather than devoting all their attention to settling losses after an event, a claims contingent could work more closely with underwriting colleagues who are integrating many of the same emerging technologies and data sources, offering valuable feedback on how policy language, terms, conditions, and pricing are playing out in the market.
Some might even leverage their forensic expertise more proactively to support loss control services. One auto insurer CCO interviewed has aligned the company’s risk engineering and claims departments to create a continuum to keep losses from happening in the first place.
As more digital tools come online, insurers will likely be able to apply accelerated claims handling and automated decision-making to an increasing proportion of their overall cases, thereby boosting claims professionals’ productivity while freeing up capacity. However, a natural follow-up question that’s likely front of mind for many in claims is whether automation will make them redundant? And the answer is that it depends on whether they can adapt, so they keep adding value to the customer’s claims experience.
With new data and technology at claims professionals’ disposal, their roles and responsibilities will likely change. Traditional activities such as data collection and verification, loss estimation, and claims settlement could take somewhat of a back seat as automation solutions mature.
But this does not mean claims professionals will play second fiddle to emerging technology. In fact, claims professionals armed with these tools would be able to accelerate the pace of claim settlement, which should increase overall customer satisfaction, while supporting the continued evolution of automation solutions. Claims leaders interviewed also repeatedly highlighted the importance of personal engagement when clients need it, which should be a differentiator in an increasingly automated world.
“Here is where I go old school,” declared one personal lines CCO interviewed. “If there’s anything wrong with all this emphasis on new technology, it’s the belief that maintaining one-on-one face time, virtually or otherwise, isn’t as important as increasing efficiency.” While automation can cut time and expenses, this CCO added, “that doesn’t necessarily mean you need to do away with customer interaction, which is an essential element to the overall experience, especially if a problem arises.”
He cited the example of his company’s dedicated catastrophe team. “The last thing you should do is cut those people, as you still need boots on the ground to provide comfort to traumatized customers. You can’t do it all with drones and bots.”
In addition, while an automated system might simply reject a claim because that particular loss isn’t covered under the policy’s terms, a human claims professional might seize an opportunity to provide value-added service. “A denial doesn’t have to be a door slammed in a claimant’s face,” said a homeowners insurance CCO. “We need to create a good experience for those not getting paid, not just for those who do.”
For example, even if an algorithm determines correctly that a policy provides no coverage for a particular loss, claimants may still need help getting a fair damage estimate and reliable contractor. “Yes, that’s a cost,” said the homeowners CCO, “but it can also create customer stickiness and a lot of good will.” The result is more likely to be a positive experience the claimant shares as opposed to complaining about being summarily dismissed by the insurer’s bot. This can make a significant difference, as one technology entrepreneur calculated it takes roughly 40 positive customer experiences to undo the damage of a single negative review.5
Hence insurers should strive to create a flexible digital experience that capitalizes on the many benefits of automation and more advanced technologies while allowing live adjusters and claims managers to seamlessly weave their way in and out as their presence is required.
In the end, claims professionals are very likely to remain the heart of their function at most carriers, only in different ways than before. It’s important to upgrade their skill sets and broaden their horizons to exponential levels, so they can complement automated systems, take advantage of more advanced technologies, and continue to add value for their employers and customers.
So, where might all these new technology tools, alternative data sources, and increased need for customer management leave existing claims professionals in their day-to-day work?
Most of the CCOs interviewed stressed that such enhancements are unlikely to do insurers much good if their claims units don’t integrate them productively or understand when and how to use them effectively. This puts the onus on claims professionals to expand their technical capabilities and adapt their roles to handle a higher level of work and wider array of responsibilities.
“It’s really not about replacing skills; it’s about adding some and amplifying others,” as one personal lines CCO aptly summarized it.
Claims departments should be developing augmented professionals blending elements of four distinct skill sets to reach the exponential levels needed to provide a hybrid customer experience that can be both digital and in-person (figure 2).
Such individuals should possess a mix of business and technology skills, speaking the language of both sides, and able to bridge the divide often separating the two in order to make cognitive systems effective and seamless in a business context.
In addition, adjusters and managers won’t necessarily be handling a claim end-to-end anymore, as they encounter more people already along the way with a digital solution, but who have been popped out by the automated process because of an anomaly or some other issue outside the system’s guidelines, requiring human intervention. Many interviewees, therefore, suggested building claims models that recognize when a customer is having a problem while enabling live adjusters or managers to step in and provide whatever support is required.
Deloitte performed advanced text analytics on more than 100,000 detailed job descriptions advertised by various global insurers over the past five years. (For methodology details, see sidebar, “Deloitte’s human capital data lake analysis.”)
To study skills sought by insurers while recruiting claims professionals, we extracted 100,000-plus job descriptions from insurance companies globally, gathered in Deloitte’s human capital data lake from full-year 2016 through May 2021.
We then utilized text analytics to determine the frequency of more than 300 key phrases associated with four skill categories of an exponential claims professional, both traditional and non-traditional, to assess industry preparedness for enhanced roles and capabilities.
Our analysis showed most insurers already seeking several skills that would be needed in an exponential claims professional. However, we also found gaps in the talent recruitment process, which if allowed to persist might inhibit the transformation of claims departments to exponential levels.
Traditional, but still relevant skills such as claims management, customer management, and teaming have been consistently sought across all five years, advertised by at least 90% of job profiles listed by carriers.
Encouragingly, as we focused on the top skill categories for exponential claims professionals described earlier, it is also evident that capabilities involving business acumen (such as market sensing and critical analysis) and customer engagement (such as relationship management and negotiation) are indeed already being actively sought (figure 3).
However, at an industry level, under 50% of job descriptions have listed the need for data analysis skills. While all claims professionals won’t have to be full-fledged data scientists, most will likely be required to have a working knowledge of the field to take advantage of all the new information at their disposal and be able to communicate the implications to stakeholders. Many also should be able to help data scientists incorporate the specifics of how the claims process works into their systems, as well as determine how data analytics might alter their roles and day to day duties.
Carriers do appear to be making progress in seeking this capability, with mentions up by nine percentage points from 2016 to 2021, but there is still a long way to go before these essential data skills are sought as actively as those involving customer engagement and business acumen.
Meanwhile, only 10% or fewer insurer job descriptions indicated the need for people able to handle emerging technologies, such as artificial intelligence and various types of robotic process automation. Indeed, the percentage of job descriptions advertised by insurers explicitly seeking those prepared to handle these cutting-edge tools has actually dropped by half from 2016 to 2021, to only 5%. While not all claims professionals need to be fluent about every new technology, they likely should be familiar with how most of them work so they may deploy them properly and double-check outcomes.
These gaps could indicate a disconnect between what insurer recruiting departments think they should still be advertising to fill legacy positions versus the types of skills needed for the more exponential roles adjusters and managers will actually be expected to fill going forward.
With reliance on advanced technologies quickly rising, insurers should be much more proactive in working with their talent recruiters to seek out individuals experienced in these cutting-edge areas. An alternative is to enhance their training programs so they may quickly get recruits up to speed with the latest data and technology tools available to claims professionals, while also schooling them on the exponential roles they will be expected to fill in conjunction with technology transformations.
There may be no “magic formula” for exponential claims transformations since carriers should take customized approaches based on their line of business and customer segment. However, feedback from those interviewed helped us distill these important guideposts for the transition:
This tripart strategic game plan should be tied closely to recruitment and training efforts so insurers can either acquire and/or develop the necessary skill sets cited in figure 3 for exponential claims transformation. Roles and responsibilities may also need to be reassigned or redesigned so that staff and technology-driven elements of claims management complement one another, allowing team members to focus on higher-level duties while leaving room for ongoing personal engagement with customers when necessary.
Adaptability will be crucial. Claims professionals can’t afford to think in a static way as the evolution in systems, processes, and tools accelerates to keep up with intensifying competition and rising customer expectations.
“We’re already seeing big changes, but over the next five years our jobs will be very different in ways perhaps we can’t even imagine,” a multiline carrier’s CCO noted when asked what developments excited him about claims as well as what looming challenges were keeping him up at night. “What sounds far-fetched in claims handling will be routine before long.”
Deloitte’s insurance group brings together specialists from actuarial, risk, operations, technology, tax, and audit. These skill sets, combined with deep industry knowledge, allow us to provide a breadth of services to life and annuity carriers, property and casualty insurers, reinsurers, and insurance brokerage clients.