Technology can support claims on many levels, but users should be wary of relying on artificial intelligence instead of the real thing - particularly in spotting fraud. John Hancock warns against allowing IT to be the driver of the claims process
This is the most exciting time in the history of claims technology, according to David Rich, chief executive at ATL Software. And he is not wrong. Several pressures and priorities have come together in the current climate to make adding value to claims a priority. A growing need for cost control to shore up profitability, end users' higher expectations, greater sophistication exercised by those making fraudulent claims - even the Financial Services Authority has got in on the act with a demand that all aspects of the business, including the handling of claims, should be reviewable through clear audit trails - not an unreasonable requirement.
In any case, despite these developments putting claims management high up the agenda, it has always been acknowledged that the claim is the most important stage in the insurer/policyholder relationship. Technology can certainly help streamline the claims process and is being used in an ever wider number of claims management areas, from the input of information and the creation of an audit trail to supporting and informing loss adjusters, as well as in e-claims.
Imran Ahmed, insurance partner in IBM Business Consulting Services, explains that the key value technology can bring to the claims process is "ensuring process compliance across the operations which, in turn, can drive significant productivity and leakage benefits". Barry Ryan, head of product management at software supplier Fineos, adds a further dimension saying: "Automatic administration creates an electronic hub for claims (handling) and provides a cockpit from which the claims handler can monitor the claim and the supply chain of products and services needed to satisfy the claim."
Productivity benefits are not confined to a faster and more effective process, but also, as Kevin Larman, director, client relationships at Cunningham Lindsey, explains: "E-claims can create a completely electronic file capable of interrogation for present position, reserve information, copies of correspondence and the ability to carry out remote auditing."
Speaking more specifically about the application of technology to the many rules that govern claims, Maneeza Malik, industry marketing director for software supplier ILOG, sums up technology's value when applied to rules in the business as "providing relief from the excessive workload of routine tasks". Instead, by utilising technology, he claims people have more time to make quality judgements and decisions, leading to greater productivity and customer retention.
Mr Rich also believes that: "Technology should be something that truly helps claims staff do their job as quickly and efficiently as possible." What then can technology do for those working in the claims process?
It can handle the initial validation of a claim; matching basic data to determine this really is the insurer's client or that the appropriate cover is in place. And although much information is still transmitted by fax, where a good document management system is in place, even faxes can be held electronically making them easier to move around and to integrate with other documents received by, or generated within, the system. When insurers have to communicate with outside organisations such as loss adjusters, the use of XML formats can allow information to be passed between systems without human intervention. So, when an adjuster has completed an assessment, a copy of the outcome, as long as data is set out in fields agreed by both the insurer and the adjuster, can be placed directly on the insurer's claim file.
The use of web-based, 'paperless-office' systems, as opposed to old-style electronic data interchange, allows the creation of virtual workspaces where a file can be viewed and discussed by several parties in different places, as long as they all have internet access. This saves time and reduces the risk of error, where different people interpret a decision in different ways.
For this type of arrangement to work, all participants in a system must adhere to the same standards and protocols. Service level agreements between the various parties in a process will define those standards, although loss adjusters, in particular, may have to deal with several standards from different insurers - a complexity that really does have the technology earning its keep.
Loss adjuster Crawford & Co is developing its Prime system to automatically update a client insurer's system with information such as what materials have been ordered and what funds have been reserved for a claim, thus making the administration of the claim automatic. However, while some industry standardisation may be agreed in broad terms to facilitate the application of technology, it is unlikely that industrywide standardisation of claims rules and procedures will ever happen because that would remove the opportunities to tailor each service to particular markets.
Similarly, no matter how much technology can take over handling smaller and/or similar claims, for larger and/or more complex cases, a greater degree of human intervention will still be necessary - especially at decision stages, with the use of technology very much in a supporting role. But with wafer-thin margins, any cost efficiencies that can be provided by technology will be welcome.
Angus Watson, claims & customer services manager at Hiscox, comments: "(At the higher end of the market), we can still apply automation, but must always be able to match service agreement to service promise." In the assessment of a claim, whether or not a loss adjuster is involved, technology can ensure that nothing is missed and get data to the claim file sooner to ensure a faster decision and, where appropriate, settlement.
In addition, the use of equipment such as digital cameras to allow an adjuster and a claims handler to discuss a motor repair in real time, with online ordering and authorisation of materials and replacement goods, all helps to reduce the time and cost of a claim, while improving the policy holder's perception of service.
Not being able to find out what is going on with a claim is more annoying than knowing why a delay has arisen. Claimants and their representatives need to be kept informed of how the claim is progressing. E-claims allow different people to access components of a claim file and, with proper security, that can extend from the insurer's own personnel to a broker and to suppliers - for instance, car hire companies or even to the client themself.
Of course, the high-profile claims technology applications are those used to deter and detect fraud. However, these also have the potential to be contentious, with insurers wary of using emotive tabloid terms such as 'lie detector'. The actual term for the technology is 'voice stress analysis' because it registers certain vocal traits associated with stress and, while it can be one means of indicating a need for further investigation, it cannot be a definitive arbiter of guilt. As valuable as VSA is, it is also vital to carry out intelligent questioning, where a series of questions are designed to spot contradictions in answers to apparently different questions about the same matters. Intelligent questioning requires staff training as much as anything, but technology can help in selecting the questions and spotting contradictory answers.
Other software applications can look for particular patterns in claims that are already known to be possible indicators of fraud. For instance, in one loan fraud in the banking sector, multiple claims all bore different names and addresses but shared one telephone number.
This would have been difficult to spot through human processing of thousands of loan applications to dozens of companies over some months, however, when one company's system picked out the recurrence of this number in several apparently unrelated applications, other companies were alerted and found that they had multiple loan applications with the same number.
Systems should also look for patterns in the internal handling areas, as a couple of recent insurance frauds have been carried out by, or with, the collaboration of people working in the insurer's claims department.
The important issue with such systems is to draw the line where it will pick up most claims with a potential for fraud, but not insult anybody.
Then the 'clean' cases can be handled automatically to get a rapid settlement and all the goodwill that accompanies that, while the cases that warrant more careful consideration can receive the full attention of trained personnel to take most of them to a rapid settlement and deal with the minority of real frauds in accordance with company policy. The other value of such systems is that simply stating they are in use will deter all but the most determined perpetrators of fraud.
But it would never be a good idea to rely entirely on technology in this area, as Steve Cullis, competitive intelligence analyst at investigative analysis software provider i2, explains: "Real fraudsters will be able to control their voice and know where the thresholds (that might warrant a more thorough claims check) are, in order to put their claims in just below the margin."
One stage further
There is no doubt that the claims process needs to use whatever means come to hand to cut costs and improve service. Theodore Agnew, managing director at claims outsource specialist Town & Country Assistance, speaks of "liability claims inflation running at 6%-8%". Town and Country has taken the application of technology one stage further using a paperless system to handle the process in India, where the business is based.
Technology can be a great engine for the claims process, but should not become the main driver of that service. Michael Booth, claims technical director at Groupama, explains that the trick is to get "the right balance between providing a high quality of service and having technical expertise to support that service and control claims costs".
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