The global pandemic has created a real imperative for modernising the claims process, argues Ashi Bagdadi, corporate vice president, insurance for WNS, ahead of a webinar on the issue.
COVID-19 makes it more important than ever to modernise claims processes, says Ashi Bagdadi, corporate vice president, insurance for WNS – a business process management (BPM) company which co-creates solutions with more than 50 global insurance companies, ahead of an Intelligent Insurer webinar on the topic.
The global pandemic has had a profound impact on the claims functions of insurance companies around the globe. On the one hand, the number of claims has increased significantly, with many relating to new or unusual situations. On the other hand, insurance companies, like many other businesses, are struggling to manage employees who are working remotely. They also face the challenge of personnel shortages due to illness and burn-out caused by working from home without adequate childcare support. Some of the insurers are also facing talent shortages to handle complex claims worsened by shifting customer expectations.
The picture is likely to get worse before it gets better. “Based on the high court’s judgement on 15 September, the Financial Conduct Authority’s (FCA) test case on business interruption (BI) claims may have a substantial impact on UK insurers,” says Bagdadi. “Not only will they have to pay out claims that they have not factored into their pricing, but they will have to do so quickly — probably within four to six weeks. This means that most insurers will use their highly experienced, in-house staff to manage complex claims covering quantum valuation and coverage. Inevitably, they will be compelled to look again at their operating models and explore partnerships with third-party claims service providers to drive automation and digital interventions to optimise the triaging and management of lower value, simpler claims.”
The need to modernise claims systems in the times of COVID-19 will be the focus of a webinar hosted by WNS on October 8, 2020, titled Modernise Legacy Systems for Enterprise-Wide Compatibility and Optimum Claims Decisions.
As well as looking specifically at claims systems, the webinar will also address how the wider picture, in terms of changed working habits and locations, can drive modernisations that will impact claims processing. The webinar will also discuss the key elements that are absolutely necessary to drive claims transformation efficiently including an agile, flexible and digital ecosystem to make insurers future-ready to cope up with disruptions.
For example, the “new normal” – which for many involves home working – is highlighting the need for a more flexible approach to certain types of insurance. Car insurance is a case in point. With lower car usage set to continue, there has been growing demand for ‘pay as you go’ insurance products such as those based on the use of telematics. “Insurers should rethink how they will respond to this changing demand among consumers,” says Bagdadi.
There have been significant changes on the home insurance front too. Escape of water claims due to problems such as faulty heating and leaking pipes — normally one of the biggest perils — have reduced because people have been able to respond more quickly as they are at home. Conversely, the increased presence of customers in their homes has increased the claims for damage of household items, and regular wear and tear.
“Hence, insurers will have to start assessing ways to include some form of wear and tear claims into their policies which is mostly excluded in standard cover,” says Bagdadi. “In order to respond more accurately and with greater flexibility to consumers’ circumstances in their homes, insurance companies should leverage telematics like the motor insurance sector. This is likely to lead to increased usage of the internet of things to improve the accuracy of managing claims for household items.”
Meanwhile, the US market is set to be hit with estimated costs of around $90 billion in medical claims.
“This is because more consumers have complex and expensive medical insurance,” says Bagdadi. “In a hypothetical severe scenario, about three to four million people might end up in hospitals, whereas in a moderate scenario this number might be about one million. Under a more moderate scenario, COVID-19 medical costs would top $30 billion, which is in line with a strong flu season.”
Around 170 million Americans are covered under Medicare, Medicaid, employer and individual health insurance plans. At present, the US tops the world with the highest number of infections, with cases continuing to soar in states like New York, Florida and Texas. It is estimated that roughly 50 million insured Americans will eventually be infected with the coronavirus. “More generally, across the US, several states have explored legislation compelling insurers to reimburse policyholders for claims which are explicitly excluded,” says Bagdadi.
He also anticipates that claims for trade insurance may spike as contracts are cancelled, transport is disrupted, and businesses suspend operations or even declare bankruptcy. “Various government measures will possibly prompt an influx of claims related to delays in construction, infrastructure and capital projects,” he says. “Some employers are likely to face claims for failing to protect their workforce.”
Factors such as increased financial pressure on individuals and companies alongside a growing number of claims to be verified could possibly increase the chances of fraud, he adds. “Unfamiliar requests and claims by customers mean that the anomalies that would normally cause the system to automatically flag a possible fraud will not be relevant,” he says.
On top of this, the industry faces the risk of claims farming companies launching specialist COVID-19-focused interventions.
“As the incident rates for motor claims reduce, claims farming companies are eyeing new opportunities presented by COVID-19,” says Bagdadi. “Some law firms are already offering COVID-19 compensation services on a ‘no cure, no fee basis’ that will act against insurers who are slow or uncooperative with claims handling.”
It’s clear that while increased pressure is inevitably going to be felt by claims departments, this can be lessened by replacing legacy systems with updated solutions that make claims processing quicker and easier.
The webinar will explore this in detail, as well as addressing a related issue that is amplifying the need to update claims systems: the continued desire by claims staff, like many other employees in all sectors, to continue to work from home, even as lockdowns are lifted. This means that insurance companies will have to ensure that their remote working capabilities are fit for purpose.
“This involves everything from superfast broadband and tightened cyber security to staff well-being and team building,” says Bagdadi. “Team leaders should focus on employee morale, and both physical and mental health during these difficult times to counter the effects of stress induced by heavy workloads, long hours and new types of claims.
“As COVID-19 puts extra pressure on insurance companies to perform, claims departments will continue to be at the front-line, handling these increased demands and doing so in the most visible way. Insurance companies that invest in their claims departments and provide handlers with the support they need will delight their customers and gain competitive advantage.”
Modernise Legacy Systems for Enterprise-Wide Compatibility and Optimum Claims Decisions takes place on 8 October. To enrol, click here.
Register now for the webinar “Modernise Legacy Systems for Enterprise-Wide Compatibility and Optimum Claims Decisions” to get the details on how to deliver a roadmap for claims transformation.
David Nichols, chief claims officer, Zurich, will be joined by Hugo Emanuel Fernandes, PhD, group claims innovation lead, Hiscox, Martin Kroos, head of claims, Achmea and Adrian McKnight, executive vice president transformation & quality, WNS Global Services.
Join us on October 8, at 10am BST to get an expert guide on how to deliver an agile, flexible and customer-focused claims operating model. Click here to register now.
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