Instant claims: making straight-through processing a reality

The shift to instant claims is underway, transforming insurance payments. But technological, regulatory and cultural hurdles stand in the way. Fiona Nicolson reports

The insurance sector is weighed down by fragmented processes when it comes to claims settlements. From first notification of loss, all the way through to payments, policyholders often face repeated requests for information and have to undertake a significant amount of administration themselves to obtain the money they are owed. 

In the latest Insurance Post webinar, a panel of industry experts explored what it might take to create a world where instant claims are more the norm in the insurance sector, and to consign fragmented processes to the past. 

During the webinar, ‘Instant claims: making straight-through processing a reality’, sponsored by Visa, technology leaders discussed the challenges of streamlining and speeding up claims processes, for the benefit of customers and suppliers, as well as for the industry itself. 

The consensus was clear: much progress has been made in the drive towards instant claims, but obstacles remain that the industry must find solutions for.  

Improvements, impacts and opportunities 

Reflecting on improvements to date, Jay Chitnis, director, insurance at Visa, reported that major developments in payment infrastructure have had a positive impact on customers and businesses. 

“The biggest shift we’ve seen is the move away from batch or cheque/manual-based processes towards a more card-based and tokenised push-payments process,” he observed.

“This has created straight-through reconciliation, using all the data available through the transaction, leading to real or near-real-time settlement, including for cross-border payouts. 

TPAs won’t disappear... but they do need to evolve. Those tied purely to manual processing are going to struggle.

Jay Chitnis, Visa

“This means less stress for customers, particularly when it comes to payment of medical and travel claims. It also means that suppliers are getting paid more quickly, improving their cashflow.” 

Considering the future for third-party administrators (TPAs) in the light of the shift to straight-through processing (STP), he commented: “They won’t disappear – they are an integral part of the insurance ecosystem – but they do need to evolve. Those tied purely to manual processing are going to struggle.” 

Sid Mouncey, chief commercial officer at Blink Parametric, also noted developments, including a sea change in attitude towards automation of claims, as he explained: 

“There has been an increase in the availability of real-time payment solutions in global and key markets in the UK, Europe and North America, as well as an increase in insurers’ willingness to adopt automatic claims processes.” 

The panel discussed which lines might have potential for STP currently or in the near future, such as dental, private medical and pet insurance. Mouncey also pinpointed others: “I see clear opportunity in the cyber space, including business interruption, linked to cyber insurance and any other disruptions where there’s a need to get cash to the business or their supply chain really quickly.” 

Hurdles and barriers 

While Lawrence Naested, chief technical officer at Collinson Insurance, acknowledged STP progress to date, he also referred to stumbling blocks that can arise. 

“Although there is a drive towards increased predominance of STP, and for it to be straightforward for both the consumer and for the person to be paid, it can sometimes be quite difficult to achieve,” he said. 

“There are hurdles to overcome, particularly when going outside European markets and into other jurisdictions, where there are other regulations that you also need to apply.

“I’m supportive of STP, but it’s not a panacea for every type of payment you need to make,” he stated. 

As well as regulatory complexities, there are technological, cultural and operational hurdles and barriers to overcome in order to make further advancements.  

Accuracy is vital, as Naested observed: “You need to… make sure you’ve got the correct identities and that the payment is genuine.  You also need to be sure that you are making it in the right currency, in the right way, as well as managing your FX risk.” 

It’s about having the right checks and balances in place,” he summarised. 

Technology, while fundamental to the execution of STP, may also be a sticking point, argued Chitnis: “Together, the operational and cultural challenges involved in STP outweigh the technical side of things, but technology can also be a barrier. 

I’m supportive of STP, but it’s not a panacea for every type of payment you need to make.

Lawrence Naested, Collinson Insurance

“The insurance market has been built on knowledge and technology, but that technology has not been built with payments in mind. Core platforms often don’t have the infrastructure that enables a payment to be made, in the way that you might make a payment through an online retailer or bank,” he said. “This is a challenge that we need to address. 

“Also, claims teams have historically been optimised for control, not for speed. An equilibrium needs to be found.” 

Mouncey highlighted cultural change as a significant factor: “A number of insurers have never made straight-through automatic payments before. The point when they first make the decision to automate payments without a team checking everything is a major step for those insurers or their TPA. 

“It can take a long time to break initial barriers down, to reassure them that they can trust the data, and that it’s accurate. It’s a big leap for insurers that have operated the same way for hundreds of years but once that first step has been taken, they often go on to deploy a range of different services using the same kind of models.” 

One of the other key issues to consider is balancing the goal of speed with robust fraud prevention. This is manageable, according to Chitnis: “Speed and safety are not mutually exclusive. They can take place in parallel.”

He added: “There is no technology in the world that is going to cure the fraud problem in insurance. We still need humans reviewing claims for fraud because there will always be a space where people try to take advantage. There are ways that we can limit and mitigate the risk, but it depends on the type of transaction, claim and line of business.” 

Vulnerable customers 

Beyond fraud, there are other high-priority issues to address in the light of STP, including customer needs, particularly with regard to vulnerable customers. 

Naested said: “Transparency is key. You have to consider whether consumers are happy for claims decisions to be made in an automated way. You also need to know what your regulatory obligation is with regard to informing customers about this. You have to think about consumer experience and whether your service model is suitable for everyone in your customer population.

“We need to make sure that we are being fair across our customer population, ensuring that vulnerable customers’ needs are thought through. It’s not a case of one size fits all.” 

Chitnis suggested that vulnerability is inherent in the claims process: “At point of claim we are all vulnerable customers,” he observed: “There isn’t any point in the process where you’re not in a vulnerable position. 

“It’s therefore important to instil within claims teams that a payment is not just a transaction – it’s a ‘moment of care’. 

We want to get payments to people quickly to help them when things go wrong.

Sid Mouncey, Blink Parametric

“Claiming on an insurance policy is a moment of care, not a moment of transaction,” he emphasised: “It’s exceptionally important for insurers to get that right – because if they do, they deliver to the insured what they have paid for and retain the customer.” 

Mouncey also stressed the importance of the human factor: “We want to get payments to people quickly to help them when things go wrong. While we try to do everything digitally, having a human at the end of the phone is important for people who need an extra bit of care.” 

Naested said the industry needs to do more to support customers, including helping them make the right decisions when choosing their insurance policy and making the claims process easier. 

In a similar vein, Mouncey reiterated: “It’s all about education, communication and improving your processes to make it simple for customers to engage with your business.”

Chitnis added that he would like to see more engagement between insurers and young people, to educate youngsters about insurance and to learn from their views. 

AI involvement in STP – and regulation 

Naested noted that AI is not a prerequisite for STP, but that it plays a part and there is appetite to drive it further. 

“AI is front of mind,” he confirmed: “It’s a board-level discussion topic focusing on whether we are going fast enough, being innovative enough and if we have the right controls in place.” 

While Mouncey highlighted AI’s benefits, he also noted that some clients are exercising caution: “AI is obviously an incredible opportunity for the industry. 

“However, we have a number of contracts where AI is not allowed to be used in the core service delivery because either the regulation is unclear locally or the local team have taken a risk decision that they don’t want AI involved in claims decision-making. 

“There is a lack of clarity in lots of markets around the world about what the regulation actually is, [how] it will evolve and how fast it will evolve.”

Insurers have valid, pragmatic concerns about the risk of getting it wrong, he concluded: “People don’t want to get caught out by implementing processes and structures now that may lead them into problems in the future.” 

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