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Apr 2019

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Customer Focus - Getting it right with claims

Source: Asia Insurance Review | Sep 2015

EY’s 2014 Global Consumer Insurance Survey asked consumers around the globe about their relationship with insurance providers. The survey highlighted the need for considerable work on the part of insurers to develop stronger and more mutually beneficial partnership with their customers. Mr Jack Jia of EY shares the findings.

An Asian perspective…
   A customer purchased a health insurance policy from an Asian insurance provider. Just a month later, he was unfortunately involved in a car accident, and broke his leg. About to go to surgery, he assumed that he was covered – only to be told by his doctor that the surgery was not in fact covered by his particular insurer. 
   The customer would therefore have to pay the majority of the costs. As one might expect, the customer was extremely unhappy; he called the insurer, thinking it was a mistake, but instead he was told that his claim would be denied due to an “early claims” red flag. Having only purchased his insurance a month earlier and then making his claim within 30 days from the date of purchase meant that the insurer felt able to turn down the claim. The subsequent battle with the insurer took more than three months, after which the customer finally did manage to have his surgery costs refunded. 
   Not surprisingly, the customer proceeded to switch to a new insurer at the earliest opportunity, and told all his friends and family about his experience with the old insurer. 
 
The question then becomes: 
   Insurance providers are facing many new challenges in the claims landscape in Asia. An explosion in data volume and a proliferation of data sources, as well as outdated technology infrastructures, currently limits the ability of insurers to gain a better view of their customers in order to provide responsive claims service.
   EY’s 2014 Global Consumer Insurance Survey asked consumers around the globe about their relationship with insurance providers. The survey highlighted the need for considerable work on the part of insurers to develop stronger and more mutually beneficial relationships with their customers. It would be fair to say that the time has come for insurers to engage fully with all their customers to find new ways to deliver value to them. 
   We believe that the key challenges are:
 
1  Cost and pricing pressures
Responding to increasingly competitive pressures with strategic cost management and laser-focused pricing is a key challenge for businesses. In order to maintain a good profit margin in a slower premium-growth environment, insurers will be required to focus on long-term cost reductions, redundant operations, customised pricing and segmentation strategies.
   Implications – Weighing expense reductions against potential investment returns, priorities and performance inconsistencies will help claims organisations achieve greater optimisation and efficiency. As insurers expand into new markets and distribution channels, the pressure on the claims function to be nimble, flexible and responsive will increase.
 
2  Claims and fraud detection technology and data excellence
Engineering an enterprise data excellence strategy that simplifies systems, processes and organizational structures is another key challenge for businesses. Policy administration and claims are often managed by separate systems with significant compromises and a lack of integration. Mission-critical information needs to be more accessible to enable data-driven decisions.
   Implications – Analytics is an essential tool to better inform underwriting and detect claims fraud. Advances in digital and analytical capabilities will reduce overall claims costs and expenses, bolster underwriting practices and enable greater consistency in business processes. More robust data analytics and predictive modelling will also help pinpoint new growth opportunities, reduce the claims leakage, including fraud associated with longer claims cycles, and optimise claims outcomes. Overall, this will enable insurance companies to make more profitable and competitive decisions.
 
3  Customer-centricity
Improved customer connectivity via the expansion of distribution and customer services is another key business challenge. Insurers have inconsistent levels of service across multiple channels – and service is not always perceived as a differentiator. Most companies have no single 360-degree view of their customers, and the only customer contact is at the time of claim or renewal.
   Implications – Insurers need to better understand the customer and offer a seamless multichannel experience. Claims should be acknowledged as the key customer touch point; yet, few companies feature the claims value proposition in sales materials. The customer experience and relationship in the claims space can help build a choice of propositions that differentiates levels of service for specific customers. Moreover, there are steps that insurance companies can take in the claims process to win over the customer. These changes will have a positive impact on the efficiency and effectiveness of the claims-handling process.
 
4  Regulatory scrutiny
The volume and complexity of regulation is compelling insurers to invest in technology, data analytics and enterprise risk management capabilities. The high price tag associated with inefficient, manual data-gathering has led some companies to choose between paying fines or investing in new systems to address data compliance. 
   Implications – Increased regulatory intervention and scrutiny will require claims organisations to offer greater transparency regarding the information that they provide, ie, better reporting capabilities as well as more interaction with other operating functions. Streamlining compliance and eliminating the risk of fines or penalties are two tangible components of the business case for claims transformation.
 
5  Talent management
EY’s Claims Talent Survey in 2014 identified four primary drivers that are influencing the ability of insurers to acquire and retain new talent in the insurance industry: new technology, automation results, customer sophistication and a changing workforce. The survey highlighted the pervasive gap and talent shortage, as well as the need for greater skill specialisation and training and development.
   Implications – A maturing and ageing workforce is causing a shortage of talent in an insurance marketplace where claims experts are retiring with no suitable successors. Companies lack formal plans for recruitment and specific claims-training programs. The claims skill sets required, such as more analytical thinking and advanced tools, are becoming more complex. The talent shortage in claims – and the need for progression options and change management leadership – presents an opportunity for insurers to rethink future resource requirements in order to remain competitive.
 
The case for claims transformation and better claims fraud detection
Since not every claims experience is the same, insurers need a clear understanding of where current processes fall short and where improvement will provide a better customer experience.
   While insurers are undertaking these activities, they should be building the foundation for future claims transformation. They need to think differently about the various dimensions (customer-centricity, talent management, technology enablement and data excellence), and view each one from the perspective of how it will complement the transformational and fraud detection agenda. Typically, many of these initiatives have been driven by cost 
structure.
   Many insurers have purchased core claims technology to kick start their next-generation initiatives. In coming years, the primary focus will be to build on this claims transformation and fraud detection investment in order to pay the right claims in the right time to the right customers.
 
Mr Jack Jia is Partner, Fraud Investigation and Dispute Services at EY. 
 
For more information about EY services, particularly regarding healthcare, please visit http://www.ey.com/GL/en/Industries/Financial-Services/Insurance/ey-health-insurer-of-the-future.
 
This publication contains information in summary form and is therefore intended for general guidance only. It is not intended to be a substitute for detailed research or the exercise of professional judgment. Member firms of the global EY organisation cannot accept responsibility for loss to any person relying on this article.
 
Case study 
Improving claims loss ratio and customer experience 
 
An Asian life insurer identified significant improvement opportunities within its health and medical claims programme as it moved from a manually intensive claims fraud assessment process to one based on predictive analytics modelling and segmentation technology. Previously, it had relied on experienced health claims assessors to use their experience to identify red flags, one claim at a time. The insurer’s claims process was negatively impacting claim-processing speed and claim loss ratios, as well as customer experience. 
   EY designed a multidisciplinary team, including subject matter resources from claims operations, claims fraud management, data scientists and customer experience, to work with the insurer on a strategy to re-engineer its claims process using enhanced claims processing and fraud detection technology. 
   The claims received were segmented into three paths by claims fraud detection technology that uses advance predictive analytics models:
Express path – Low-risk and minor claims were paid out without going through a claims assessor
Normal path – Processed by assessor 
High-risk path – Claims reviewed and invested by special investigation units (SIUs)
   The insurer underwent a refinement of its core claims operations, focusing on efficiency and fraud detection technology to support all lines of business while allowing for improved claim ratios and customer experience. These efforts were implemented through alignment with quality assurance, training and performance management and supported by key metrics. The result was an improved loss ratio and faster claims payment turnaround time for their customers – a win/win for all involved.
 

 

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