Modern Insurance Magazine - The Automation Focus

AUTOMATION FOCUS

AUTOMATION FOCUS Streamlining the Claims Experience

A lot of the information on all of the paper stored in an insurance company is not actually stored in any database, but with automation it can be available for underwriters and claims professionals alike

MARK STRANG 01 Modern Insurance

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AUTOMATION FOCUS

MARK STRANG Automation is often touted as one of the most important emerging technologies.

Mark Strang, Verisk Analytics, told Modern Insurance about the impact automation and artificial intelligence could have on motor and property insurance.

Q A

What do you identify as the key challenges currently facing the insurance industry, particularly in regards to personal lines?

One key challenge is the increased level of customer expectation that can be experienced in other industries, where the speed of the service or the level of customer engagement is higher. Historically, insurance is not an industry that has on-going customer engagement, as this usually only comes at the time of taking out a policy, if a claim is made, then at renewal. That is quite a different environment compared to some other industries where there is ongoing or at least more frequent engagement.

The changing legislative environment and uncertainty is another challenge. We are very involved with personal injury claims, but how do motor insurers accurately set future reserves in upcoming years with such uncertainty? The Discount Rate and whiplash reforms need to be carefully considered. Brexit is another challenge, and we’ve seen fluctuations in the exchange rate impacting material costs in another area of our business: property claims valuation. We provide an annual property report, and one of the big changes there is that some of the materials being used to carry out repairs have changed quite significantly due to the value of the pound or other commodity market factors.

Q A

How might technology be utilised to address these challenges?

It is often about tying technologies together. Historically, a company has always wanted a single system, and it’s normally the case that there is no one system that can do everything.

So interconnectivity is probably more important now than it’s ever been. You could have a single back-end system, but using this to link with best of breed systems for what they are best at and connecting them is probably one way to go because it is potentially very agile.

Q A

How has the role of automation in insurance evolved in recent years, and how can it be used to meet customer needs?

Several years ago, we interfaced with medical reporting systems to automate the settlement process of personal injury claims, and we had some success doing that. We were linking data points together, mapping them so that there was a transfer of data from one system to another. Some companies are now obtaining data from unstructured data, which, for example, might be a medical report or a description of accident circumstances. Automated OCR provides the ability to get the data that wasn’t obtainable a few years ago. Obtaining more and more unstructured data is something that can help automate things further, and I think that has been a key change in the last few years. It is not just looking at data that is stored in a database, it is images as well. A medical report might have an address within it that isn’t stored in any database, but it is available to companies now because it can be read by their software. It is said that 80% of a companies’ data is unstructured. A lot of the information on all of the paper stored in an insurance company is not actually stored in any database, but with automation it can be available for underwriters and claims professionals alike.

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Vehicle autonomy is going to have a huge impact in ultimately reducing the frequency of accidents and the severity, but the crossover period is going to be challenging

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AUTOMATION FOCUS

Historically, a company has always wanted a single system, and it’s normally the case that there is no one system that can do everything. So interconnectivity is probably more important now than it’s ever been

Q

As the connected home becomes more mainstream, what role might automation play in property claims and insurance?

A

It will probably help with risk management and avoiding a claim happening in the first place, achieved through warnings. LeakBot is currently being used in the industry to sense minute changes in water pressure that suggest a leak in the piping in the house. That is something that is being used to mitigate; the leak might still occur, but it can be caught much earlier than before, reducing the final damage and therefore claim payout. A lot of appliances are now self-sensing, which should, in theory, reduce the frequency of claims and lower the cost of home insurance for everyone.

Q A

How do you predict vehicle autonomy will impact the insurance industry and its customers?

Ultimately, it could mean that motor insurance as we know it is no longer one of the major lines of business.

But in the meantime, there is probably going to be an increase in the amount of premium for motor because we are going to have a mixture of self-driving or partly automated and totally automated vehicles sharing the same roads. Some third party elements of the motor policy can be transferred to public and product liability, so the manufacturers behind the software within the self-driving vehicle could potentially be liable for an accident. Some manufacturers have stood up already and said that they will be responsible for any accident that their automated vehicles are involved in, like Volvo. Vehicle autonomy is going to have a huge impact in ultimately reducing the frequency of accidents and the severity, but the crossover period is going to be challenging.

Car ownership is likely to reduce in favour of ‘pay as you go’, for vehicles as well as insurance. There is now the ability to purchase insurance by the hour for people who don’t need insurance on the days that they don’t use or have access to a vehicle. It’s related to the change in use of vehicles, which ties back to customer expectations and how insurance needs to change to meet these. The ‘car2go’ model in Berlin provides vehicles as and when you need them. The app will tell you where the nearest car is, you then use it for as long as you need it and leave it wherever you want. That is the sort of flexible technology, particularly in city centres, where usage and automation may develop faster than we think it will. Not only do we need to think about how to deal with driverless cars, we also need to be thinking of how we deal with car-less drivers.

Q A

How might automation be beneficial in damage assessing and vehicle repair following a collision?

If you take ten images of the vehicle, two of the damage itself, the other eight walking around the vehicle, artificial intelligence can be used to tell if that vehicle is a total loss or if it is repairable. What happens to a vehicle is important to decide early on, as you don’t want to send it to a repairer for it to then be inspected by someone who then says that it is a total loss and should have gone directly to salvage. My colleagues from our ENI division are

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reporting to me that there are claims for total losses that can be sorted within a few hours. That sort of customer service is what we need; the insurer and the customer know right from the beginning of the claim whether something is repairable or not.

If it is repairable, the software knows what parts are likely to be required based on its experience of learning, and it knows how long it is going to take to repair, using Thatcham data, which all helps to reduce key-to-key time.

Q A

How is technology serving the underwriting process, and how do you see this developing further?

You have to know as much as possible about the risk that you are underwriting, and I’ll use property as an example.

In the past, policies have been based on what the policyholder knows (or thinks they know) about the property; our analysis has shown that information such as the date the property was built and the size are very often incorrect when advised by the policyholder. There is now the ability to obtain large amounts of underwriting data and low-level imagery, similar to Google Maps photography, except it’s at a lower level so that you can actually see more detail of the property, where it is and where it is linked to. We have a product called Underwriter’s Advantage, which is a building underwriting report. It provides a large amount of underwriting data, including rebuild costs, crime, flood and terrorism risks and uniquely identifies buildings and properties and how they are linked.

There is now much more data available around flood risk as well as crime events in an area, and it is all down to a more granular level of accessible detail. As an underwriter, you now have the ability to really understand what risk you are writing and know what is related to it, often without the need for a survey.

On the motor side, it is again about knowing the risk and having more access to data, so one important thing is the race to understand the driving behaviour that you’re insuring, because you can understand quite a lot of that if the person coming to you has been using a telematics box. However, there’s no real easy way of transferring that to another insurer, because each insurer has their own devices they fit, and so each insurer is finding out afresh and anew about that driver. Of course, if policyholders aren’t willing to share their behaviour, they might be the risks you wouldn’t want to write.

But it’s not just about how people are driving, it’s where they’re driving and at what time as well, and I think there will be scope for the underwriting side of the business to once again prevent claims. For example, on an icy morning the driver could be warned that their normal route to work tends to have icy patches and that there’s been a high frequency of accidents there. We now have the ability to help prevent those accidents happening in the first place. On a sat nav system, you have the options of fastest route and shortest route, and I can imagine there being a possibility for insurers to suggest the safest route. If someone is willing to always select the safest route, they could be given an advantage on their premium.

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AUTOMATION FOCUS

A lot of the information on all of the paper stored in an insurance company is not actually stored in any database, but with automation it can be available for underwriters and claims professionals alike

Q

What risks are associated with implementing new technologies and automatic processes, and how can insurers mitigate these?

A

Data privacy is one. What extent are people willing to share this data, which ultimately could help them, but won’t necessarily do so all the time? There can be a danger of over automating as well. There needs to be a balance between automating a simple claim and maintaining client contact, because things could become so slick that there’s no human involvement at all. That need has to be identified among certain policyholders who may not want to use modern technology. A blanket approach shouldn’t be applied to all customers, as there will be some that will prefer to talk on the phone; however, the technology can still be used behind the scenes. There’s probably going to be a move from having very policy-related technically aware people on the claims side, to greater automation of the simpler claims, and there will probably be more of a customer care type skillset required. Artificial intelligence could deal with the technical aspects so that people can focus on being there as an empathetic ear for the customer and understanding and helping them through the process of the claim.

Artificial intelligence is a rapidly expanding emerging technology, especially in terms of streamlining processes.

It could potentially lead to significant lower-skilled job losses in the industry, and that’s something insurers should be aware of because it’s probably going to be difficult to manage. One of the challenges then becomes how to train people, because expertise will still be needed, especially for more serious claims. How can that expertise be built if there’s no clear route to deal with easy, straightforward claims to start with? There will be quite a different route to career progression if people don’t have that technical insurance knowledge. The ability to deal with change and to innovate is likely to become critical in the insurance world of the not too distant future.

MARK STRANG is Senior Business Development Manager at Verisk Analytics.

Q

How will data obtained through automation in particular help improve the services provided to customers?

A

It will help reduce the risk of a claim happening, but it will also provide that deeper understanding for the insurer about the risk that they’re writing. You could also get ahead of the client claiming in the first place. For example, there are insurers in China and now in Europe that provide flight delay compensation automatically. These companies acquire a list of delayed flights and match this against their policyholders who are on those flights, then automatically send them a compensation payment. The policyholder hasn’t even made a claim, but they’re getting the payment, and the advantage in that is the automated process is very low cost compared to somebody making a claim, as there might be a lower percentage of people making a claim, but it would cost more to handle them. I think that will happen more and more.

It will be so important to have validation in place against fraud though, because you can imagine people will start to take out cover with delay-prone airlines knowing that a claim is more likely to arise and they’ll get an automatic payment.

So real time anti-fraud measures will be critically important.

Q

How else do you foresee technology impacting insurance in the years to come, and what emerging technologies should insurers have on their radars?

A

Most things are all linked to prevention, but drones are often talked about in disaster areas, for example, after a flood. Drones could be the only thing that can get into the area to identify where there is the most damage so resources can be planned accordingly. Direct Line Group have developed some emerging technology that uses drones to assist people who have broken down, so it’s a technology that’s actively on their radar.

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AUTOMATION FOCUS

CASE STUDY

How LV= and Verisk Work Together to Improve Service while Lowering Costs s an early adopter of Verisk solutions, LV= has been able to distinguish itself from its peers in the motor insurance industry and deliver exceptional service through automation, advanced analytics, and empowering claims handlers to make better decisions without the need for continual management involvement.

Working in partnership, Verisk has been able to help LV= maintain the close relationships vital to success in today’s competitive market.

A

Using tools such as Claims Outcome Advisor (COA), Case in Point and the Verisk Ministry of Justice (MoJ) solution, LV= has benefitted from automated capabilities that significantly increase handler efficiency – enabling them to focus more on the claims that require their attention most.

LV=’s enthusiastic adoption, disciplined implementation, and savvy use of Verisk solutions has helped the company manage life cycles, increase efficiencies per case and protect its combined ratio.

Verisk has worked closely with LV= to implement claims solutions to improve accuracy throughout the claim life cycle. Support is provided via WebExes, on-site support visits, and face-to-face feedback meetings.

Driving Operational Efficiency

With the COA suite, Verisk has revolutionised the way claim handlers combat the sometimes-unrealistic settlement expectations of claimant solicitors by helping LV= handlers work more effectively across all teams and offices. Rather than review claim records manually to identify cases with similar injuries and parties, COA accelerates the process, drawing on a vast historical record to deliver LV=’s claim handlers relevant records and suggested settlement amounts quickly and accurately.

This means that claim handlers can spend less time working on each claim.

Improved operational efficiency, better managerial oversight, and access to rich data sets with advanced analytics have helped LV= scale improvements at every stage in the life cycle of a claim. This has improved productivity, enabling handlers to spend more time focusing on customers.

Adapting to a new Era

Since the introduction of the Jackson Reforms – and implementation of the MoJ portal – a strict compliance programme has made effective claim management essential to keeping life cycles short. LV= has found that solutions from Verisk have helped claim handlers meet the tight deadlines and exacting standards that have come from the reforms.

The fluctuations in personal injury claim volumes and costs over the past decade in the entire motor sector have demonstrated the need for a solution – and how every improvement can lead to rapidly accumulating benefits handlers. Additionally, they were able to pinpoint potential shortfalls. The system has enabled claim handlers to see all the cases they need to work on, understand expectations, and manage their own workload. Improvements to work flow and time management have clear benefits for LV=’s customers, given that shorter cycles are directly linked to the customer experience.

Whether it’s to address the MoJ requirements or the broader set of claims that LV= handles, Verisk has committed to helping clients, including LV=, serve their customers more effectively. Its help desk, which consists of a team of former claim handlers who help users get more out of Verisk solutions, provides clear, timely, and valuable support.

Real Results in a Challenging Market

The fluctuations in personal injury claim volumes and costs over the past decade in the entire motor sector have demonstrated the need for a solution – and how every improvement can lead to rapidly accumulating benefits. Verisk has helped LV= capitalise on this significant opportunity to control indemnity spend and reduce overheads. LV=’s willingness to be an early adopter of Verisk solutions has provided it with a clear competitive advantage and a solid framework to further embrace digitisation in the insurance industry. Automation will become ever more important as it moves beyond existing claims applications such as data entry and duplication – particularly as Artificial Intelligence develops and possible related legal reforms take effect.

JOE PENDLE, Managing Director - UK & EU, Verisk Analytics.

With the implementation of Verisk’s MoJ solution, handlers could view all new cases on the MoJ work queue dashboard and spend less time assigning claims to

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AUTOMATION FOCUS

MARTIN MILLINER Modern Insurance caught up with Martin Milliner, LV=, one year on from his article outlining his thoughts on the challenges in the industry. He discusses how the perceived compensation industry has changed in the past year, and how technology will play a vital role in combating fraud and improving the claims experience for honest customers.

Q

Did you feel Part 1 of the Ministry of Justice’s reforms to reduce fraudulent whiplash claims were sufficient in addressing the challenges in the sector, and are there any areas where you thought these missed the mark?

A

As far as the reforms went, generally, yes. Part 2 should address some of the challenges that aren’t in Part 1, for example around how rehabilitation could work in the future. There does need to be a balance between providing representation for those who need it while also ensuring we don’t have the same volume of unnecessary claims in the system that we’re subject to today.

The transfer of regulation of claims management companies from the Claims Management Regulator to the Financial Conduct Authority can’t come quickly enough.

That will be a game changer, and I can’t emphasise the need for the government and the FCA to make that happen as quickly as they possibly can.

Q

You’ve previously expressed your belief in the existence of a compensation industry that exists in England & Wales. Can you outline how you would define this, and is it something you feel has changed in the past twelve months?

A

There are models out there that have vertical integration of all activities in a single model, including accident management, credit hire, CMCs, rehab, medical agencies, lawyers etc. That integrated manufacturing scheme of compensation claims is certainly something that’s present today, and to a large extent fuelled by changes in the past.

It wouldn’t be okay to drive without a seatbelt or use your mobile phone while driving, and it should be equally abhorrent for people to be pushed into making a fraudulent claim

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Broadly speaking, we have seen a change in that behaviour over the last twelve months. There has been a disaggregation of some of those vertically integrated models. For example, MedCo and the banning of referral fees have created change. Between the Solicitors Regulation Authority and the CMR, there definitely has been a more forceful regulation of the market, which has meant some of the poor behaviours that are present in the system are no longer present. However, in some areas they’re still alive and kicking. The holiday sickness claim epidemic over the summer is very much a testament to those poor behaviours still existing where opportunities are open to be grabbed.

Q

While fraudulent behaviour continues to be an issue in personal injury, where do you identify behavioural issues among those working in the sector?

A

Fraudulent behaviour does still continue in the personal injury sector. In the last twelve months we have seen a reduction in the number of claims we would class as fraudulent. That’s due to a combined effort from the insurance industry, the SRA, CMR, the Insurance Fraud Enforcement Department, the Insurance Fraud Bureau and indeed lawyers. We have seen the exit of known law firms that were featuring in our top ten lists of antagonists in this area, and also a significant reduction of CMCs practicing in the PI market. A combination of those things has seen a damping down of fraudulent behaviour, but it is still not far from an all time high.

Q

How does the volume of fraud differ regionally throughout the UK, and to what do you attribute any differences that are apparent?

A

There are regional differences. Overall, the pattern is pretty clear that where there’s a reasonable population of CMCs, we see quite a high propensity for fraud, so we can only draw a conclusion that the proximity of CMCs in those hotspot postcodes are how those claims are being generated.

How can we reach a level of public awareness around the fact it’s not okay to make a fraudulent claim? It wouldn’t be okay to drive without a seatbelt or use your mobile phone while driving, and it should be equally abhorrent for people to be pushed into making a fraudulent claim. Claimed and Shamed does a great job, but people just see that as a bit of entertainment; we need to be making it very clear to people that there are consequences.

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AUTOMATION FOCUS

If you automate everything, you do sometimes lose the richness of human interaction and oversight, so there has to be a blend of expertise

Q

Q

A

A

How might the recommendations made by the Insurance Fraud Taskforce benefit the personal injury sector, and is it too late for them to be implemented?

The recommendations of the IFT are almost all agreed on across the industry. There’s nothing to fear for law firms or CMCs that practise honestly and with the right behaviour.

Some of the IFT recommendations have already been taken forward and lots of them are potentially in the Civil Liability Bill. Overall, they have brought insurers, lawyers and regulators together to at least talk about the issues and agree about some of the recommendations that should be taken forward. A lot is happening despite there being no vehicle to drive these things through. We have seen common ground issues being taken forward generally, reportedly with some success.

Q

How might developments in technology aid the insurance industry in combatting fraud and improving the claims experience?

A

There are a variety of things here. Data analytics, and data generally, are key. If both sides are more willing to share data across the market, lawyers can benefit just as much as the insurers can to make sure they are representing the right claimants.

There’s an awful lot of data available; the actual location and time when the alleged accident happened could be obtained from that data, as well as whether the vehicle was travelling at a high enough speed to cause an injury or how many passengers were present in the vehicle and if seatbelts were on. All of the activity helps spotlight potential fraud.

Q

How are attitudes towards automation and artificial intelligence changing in insurance, and what impact could these have on reducing fraud?

A

Artificial intelligence and machine learning are powerful tools that are enabling insurers to spot suspicious activity and potential fraudulent claims that otherwise may have gone unnoticed. That type of intelligence is also leading to links being made between professional enablers: medical experts, CMCs, storage recovery agents, you name it. Patterns of behaviours are becoming much easier to see wherever professional enablers are working together to consciously promote fraudulent claims. Machine learning and data analytics are very powerful, and we’ve certainly benefitted by finding cases we otherwise wouldn’t have seen in the past.

There are risks around automation. To make every decision data driven, you do need professional oversight and experience to understand context. If you automate everything, you do sometimes lose the richness of human interaction and oversight, so there has to be a blend of expertise. The power of digital intelligence and machine learning has to be put in the right hands of these experts to support their decision-making, not replace it.

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Looking further into the future, could mainstream adoption of autonomous vehicles signal an end to motor insurance fraud?

Fully autonomous vehicles are a long way away. I don’t think they’ll completely remove fraud risk, but they make things like staged accidents far more complicated to create successfully. Things such as slam-on activities, where people are breaking suddenly just to cause a crash, are going to be very difficult to stop; autonomous vehicles won’t be able to respond to that type of irrational driving.

Q

What impact will automation have in relation to property claims as connected technology continues to evolve in the home?

A

In property claims, it’s all about prevention of problems that may affect your household, reducing costs and reducing hassle, but also improving safety. For example, I read that one million homes are potentially at risk of fire from defective tumble dryers. Connected appliances in the future will vastly improve the ability for manufacturers to help consumers solve those issues.

There will be an awful lot of new houses built, and we are now in a renting generation rather than owned. Connected appliances are going to help landlords create safety for their tenants in the future and ensure their investments are managed in a better way, rather than leaving it to tenants to report issues.

Q

What role will technology play in reducing premiums in the years to come, and how else can insurance be made more affordable for genuine customers?

A

Crashless cars or cars that are equipped with monitoring devices so you never need to make a claim are probably some years away. However, the ABI data for Q1 this year showed a 6% fall in motor accident claims frequency versus Q1 2016. Things like scrappage schemes, the death of diesel, the increasing churn of the vehicle car parc, and more adoption of high aspect technology vehicles means the cost of claims will fall, and premiums will fall too due to the competitive nature of our marketplace. So the more that people start to adopt technology, the sooner lower premiums will come.

There’s a part for the government to play in that; they could support adoption through things like scrappage scheme grants. They need to be looking at things such as electrical charging points, investing more than they’re planning to at the moment, and upgrading smart road technology. If we can get vehicles talking to each other we can reduce harm done to road users. We’ve done a fantastic job of reducing injury to vehicle occupants, but that hasn’t been the case with cyclists and motorcyclists, who are far more prevalent on the road than they used to be. That technology needs to get out there to reduce harm to vulnerable road users, and that would really make a difference to the cost of premiums for consumers.

MARTIN MILLINER is GI Claims Director at LV=.

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