Digital Vision: Digital Insurance

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Understanding the claims digitization drive

At a Glance

What are the prospects for a fully digital, end-to-end insurance claims process covering pre-litigation? Natalie Larnder, Head of Market Affairs at legal firm Keoghs, looks at seven of the key drivers behind this transformation and some of the early lessons of claims digitalization for market players.

5 Minute Read

Natalie Larnder

Head of Market Affairs, Keoghs

Soon after his appointment as Master of the Rolls in 2021, Sir Geoffrey Vos set out a vision for digital justice reform in the UK. As a keen proponent of digitalization, Sir Vos’s desire to see change extends beyond the judicial process to cover the whole system, including pre-litigation.

Yet Sir Vos’s intervention is just one of a number of factors that look set to affect the digitalization of the insurance market over the coming years. So what can we learn from these drivers and can we expect a truly digital, end-to-end process for claims anytime soon?

7 drivers of digitalization in insurance

It is worth noting that the insurance claims process straddles two very different sectors. There is the insurance market in which policies are modelled, sold and administered by private companies and intermediaries. And there is the legal profession and the independent courts. Of course, many claims never make it as far as the litigation phase. However, there are a number of reasons why all those involved are keen to see digitalization extend across the whole process.

1 COVID-19 pandemic

When the outbreak of COVID-19 forced us all to work from home there was no widescale alternative to the in-person courts process. Digital tools covering aspects of pre-litigation quickly became go-to resources for insurers. Yet claims in which liability or damages could not be agreed still needed to be decided by the courts. The lack of a digital alternative has strengthened the case for change.

2 Courts backlog

Today’s huge courts backlog was already building up before the pandemic. There is now a recognition that the only way to reduce this is by introducing ways to expedite decision-making. The Official Injury Claim service for whiplash cases is one example of a scheme that has been launched to speed up the settlement of lower value claims.

3 Commercial efficiencies

For insurers, there are clear efficiencies in using technology to collect and analyze the data involved in typical insurance cases. There are also significant savings from automating or reducing the number of steps in the process. These efficiencies cut operating expenditure and reduce the cost to serve.

Understanding the claims digitization drive

4 Better customer experiences

Digitalizing existing processes can free up more time for claims handlers to spend with claimants, while cost savings can be passed on to customers or reinvested in customer-facing services. Digitalization is also an opportunity for insurers to re-look at their processes and redesign them to remove previous points of friction.

6 Combatting fraud

The cost of fraud is factored into customer premiums, meaning that every policyholder is paying for fraud risk. The ability to evaluate data from across the claims process enables insurers to more accurately spot fraudulent or dishonest claims. With the addition of artificial intelligence and machine learning, red flags can be processed in near real-time to avoid the costs of retrospective fraud mitigation.

5 Deeper insights

Insurers, brokers and adjusters (among others) tend to use their own systems of record and much of the existing claims process is paper-based. Digitalization promises to bring these sources together, and that allows insurers to interrogate data to better understand the claims process, or to use consumer insights to create new, high-value product offerings.

7 Wider industry reforms

The impact of COVID-19 and the backlog of court cases has persuaded the government to push hard to complete its reform of HM Courts and Tribunal Service (HMCTS). Initiatives on this scale will keep a huge number of claims out of court and introduce new platforms (such as the Damages Claims Portal pilot) that are intended to make HMCTS more resilient and ready to meet future demands.

No singular approach to claims digitalization

One of the biggest challenges with achieving the end-to-end digitalization of insurance claims is that there are many different types – from personal injury through to construction industry claims. Each of these sub-sectors may well need its own portal or digital process and these will take time to create.

With most pilot schemes, such as the Damages Claims Portal, it is only the courts process that is being digitalized. There are very few cases that have been trialed through the new system. Plus, the pre-litigation process (much of which is already digital) is not yet integrated via APIs. So more case-specific and technical testing is required before we can expect any wide-scale adoption.

We must also recognize that it is people’s right to ‘have their day in court’. Many argue that face-to-face discussions between claimants, defendants and mediators are crucial in some cases. This requires a degree of flexibility in the claims process. For example, including a way to take the process offline and then readmit it online after a decision has been made.

Understanding these factors and designing digital claims platforms or processes accordingly will clearly take time.

What happens next?

Just a few years ago, the digitalization of complex, high-value claims was inconceivable. However, the world has changed and there is certainly enough momentum from insurers and the courts to push through transformation. In the short time that digitalization has been on the agenda, there are three early lessons that could help to make sure future schemes are successful:

Test and trial pilot schemes based on real-world cases and platform integrations.

Build in flexibility for claimants to choose between digital or face-to-face court proceedings in complex cases.

Allow enough time for market participants to connect up each part of the process smoothly so that it actually makes things better, not worse.

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Carol Houle, Global Head of Financial Services and Insurance, Atos