What is more important- to settle a simple claim within minutes gaining a high customer satisfaction rating or spend a little more time to make sure that the claim is fraudulent?
The famous Lemonade claim settled in three seconds is seen as a success story for the application of AI and straight through processing (STP). Delighted customers and collapsed costs. But is that true?
360Globalnet has significant evidence the opposite can be true. It is often asked to provide automated solutions for high volume and low value A&D claims especially in home insurance. If it were to so do insurers may pay out automatically AND UNNECESSARILY on 35% of claims- yes over one-third. At an average payout of $600 to $750 that soon adds up. On 100,000 home contents claims a year that is over £20 million.
The claim seems reasonable; red wine on carpet, cracked television screen, stolen smartphone. "Facts" hard to disprove and insurers don't want to spend too much expensive claims handler time questioning the customer. Let's payout as quickly and at as low a processing cost as possible. WRONG!
A simple, self-service and automated claims process tackles the issue. Claimant clicks the "Make a Claim" button on the insurers website and answers brief questions on the incident. Literally a sentence or two. Selects the damaged item.
A secure link is sent automatically by email and SMS requesting photos. After, the claimant is sent link for video to give context to the whole claim.
This is when an opportunistic fraud claimant realises the story does not hang together. The carpet stains are just age, high usage and different events; the TV photo shows the damage different than that described. Surprising how many times a lost phone claim is made from the very same phone! Sounds stupid but 35% or more of claimants withdraw their claims! At little cost to the insurer, the process is still automated self-service and at minimal "hurt" to the customer.
The point that 360Globalnet makes is- IT IS A MISTAKE TO AUTOMATE PAYOUTS ON HIGH VOLUME LOW COST CLAIMS. The fact they are high volume makes the actual costs high.
Of course there will be more complex claims and professional fraudsters. A recent ABI report stated the average cost of fraudulent claims now tops £12,000 ($14,500) in the UK.
That is where a fraud solution that augments human intuition with technology is invaluable. Combining unstructured data analytics with AI and all within a digital claims platform. Combining the information throughout a claims notification form with weather conditions, telematics, dashcam data and external data sources.
BAE Applied Systems describes how fraud solutions identify organised crime and peel away the layers of deceit professional fraudsters apply to obfuscate ad mislead.
360Globalnet's fraud solution uncovered 27 organised motor fraud rings within three months of being deployed. Combinations of legal firms, scrap yards, second hand car dealers robbing insurers and bona fide customers who have to pay higher premiums.
Personal Injury (PI) Fraud is another aspect of this.
One of the biggest costs in auto insurance is PI Claims- around 28% in the UK (Source BIA). Not only that. Whilst UK Road Traffic Accidents have declined by 35% since 2004 PI Claims have risen by 40%. On top of that Claims Management Companies (CMCs) and Lawyers more aggressively target customers to maximise claims. There are more than 750 CMCs in the UK alone and since 2017 the Claims Management Regulator has cancelled 69 licenses indication poor standards and ethics by a significant minority.
One result is that insurers find it increasingly difficult to calculate adequate reserves. Not only are claims numbers rising the cost is as well. During the lifetime of a claim prognosis changes constantly and as a result the insurer often under-reserves impacting the business adversely.
One key reason for this is the vast amount of unstructured data hidden in letters, emails, medical reports, MoJ documents and rehabilitation reports. We have found that over 80% of an insurer’s data is locked away and inaccessible. Insurers find it a massive challenge to unlock and analyse the data. Add to this it changes constantly as medical specialists and claimant’s solicitors change the prognosis. It is hard enough to keep track of bona fide PI claims never bind fraudulent ones. This all results in key challenges insurers must overcome.
Challenges facing PI Insurers
- Poor claims control over the entire claims lifecycle
- Under-reserving
- Not flagging complex claims for early intervention
- Unable to identify trends and patterns
- Analytics tools complex and inflexible
- Current PI management tools lack actionable insights
- Claims files largely unreadable- relies on manual analysis
- Difficulty reading source data in multiple formats and data silos
- Lack of real-time alerts, prioritisation and effective decision making
- Ties insurers’ hands behind backs dealing with aggressive CMS and Lawyers
This lead to the recent launch of 360Globalnet's PI Analyser solution now in test by six major insurers.
The solutions are there combining technology with human intuition to make a significant impact without making customers suffer unwanted delay. A win:win for bona fide customers, insurers and their supply chain partners.
“[AI] puts a lot of pressure on the insurer to make the right decision very quickly. They have a decision of whether they should pay straight away or whether they delay that process and give the customer a different journey while they investigate for fraud”, she said. “The greatest impact AI will have is on the insurers and their customers’ experience. We know attrition is one of the greatest challenges for insurers. “Insurers generally don’t make a profit on the first year [of a policy premium]. You need that loyalty over a three- to five-year period. If you upset that customer at point of claim because you have automated through a fraud department, you’re going to lose that customer. But the customer whose claim is paid in a matter of minutes are likely to stay with you.
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