Claims transformation

Digital transformation of the claims process will bring life insurance back to its intended purpose – to provide reassurance to policyholders that their loved ones will be taken care of.

In brief

• Customer demand for life insurance is high but manual, antiquated systems often stand in the way of real growth.
• When life insurance agents have the right tools and information in hand, they can better engage customers and provide a more empathetic process that inspires retention.
• Claims have traditionally been a cost center for insurers. The trick to transforming claims into a revenue generator is investing in digital automations and converting beneficiaries into policyholders.

Imagine this true, common scenario:

You are the beneficiary on your uncle’s pension. While your family manages the many tasks that accompany a loved one’s passing, you are passed around to different claims departments. The carrier is trying to find your uncle’s life insurance policy in one of many outdated, legacy systems. It takes four months before the insurer finally locates the policy and confirms you’re the beneficiary. You receive the notice in the mail identifying the policy and validating your beneficiary status. Thank goodness your address hadn’t changed in 20 years!

Imagine the trouble someone without deep knowledge of the insurance ecosystem would have navigating the above situation. Are we doing our customers justice with our current disjointed infrastructures and manual processes? Are we providing them the care they deserve in their time of need and loss?

We’re in a time of heightened worldwide risk awareness and life insurance is in demand. System modernization, digital evolution and innovation is the only way forward if insurers are going to meet this demand and appropriately serve our customers — both our policyholders and their beneficiaries.

The 3 pillars of claims transformation for life insurers

Capgemini’s “Life Insurance Top Trends 2023” projects the insurers that engage in today’s digital evolution, put their customers first and address pain points like the ones above, will see a significant positive business impact and retain customers.

And there’s a lot of opportunity to be gained. For example, more than half (55%) of millennials — nearly 34 million adults — say they don’t have, or need more, life insurance coverage. Earning the Millennial business starts with transforming the claims process for all insureds and their beneficiaries. Any investments put into a life insurer’s systems now have the potential to deliver magnified opportunities.

Here are three pillars to claims transformation:

1. Improved customer experience through automation
   The first step in enhancing customer experience is empowering agents and customers with advanced digital capabilities. The agent-customer relationship has already evolved to be digital. Widespread technology adoption by customers of all ages has raised the bar for policyholder expectations and demand for a seamless experience. If it’s overly complicated to access and update one’s policy, data goes unchecked and the experience worsens for both the carrier and the beneficiary when it’s time to access the policy.
   
   During the initiation of a life insurance claim, the beneficiary is often required to supply a variety of documentation based on the size of the policy and confirm their own personal information. But what if the information on record is outdated? Depending on when the deceased opened their policy and how vigilant they were in updating information, something as simple as an address and as complex as next of kin could now be inaccurate.
   
   The easier the life insurance carrier makes it for customers to keep their policy and beneficiary information up to date, the smoother the process will be for you down the line as well.
   
2. Beneficiary engagement
   Your relationship with a beneficiary does not have to start when the customer dies. Options can be provided for beneficiaries to opt into one-on-one engagement with the carrier, allowing them to validate information such as their date of birth and update information such as primary address when changes occur.
   
   For regions like the United States, which has looser privacy requirements than Europe, for example, third-party monitoring can also be deployed for data maintenance. Instead of relying on the beneficiary or policyholder to come to you, simply ask for confirmation on updates received through these tools.
   
3. Asset retention
   We are heading into a high-payout period where asset retention is going to be key to survival for all life insurance carriers. The “Great Wealth Transfer” has begun, and baby boomers are expected to pass more than $68 trillion to their children over the next 20 years.
   
   As such, the relationships built with beneficiaries could be one way to close the insurance ownership and retirement gap. We can expect boomer-held life insurance policies to start paying out in large sums. If the insurer can retain even 0.5% of these payouts through new policies with uninsured beneficiaries, it will change the impact of this economic transfer across the industry.
   
   There is opportunity for carriers in the process of guiding beneficiaries through their claims. Consider a daughter filing a claim after the loss of her last living parent. Knowing that the claim process can take time and require effort this individual may not have while in mourning, carriers can offer phased payout options. Maybe she needs only $50,000 up front to cover medical or funeral bills, or indeed the million dollar claims settlement. In a few months, she may be ready to talk through the rest of the process. Is she interested in investing any of the payout to secure her own policy to protect her family the way her parents did for her?

How digital evolution enables claims transformation

Too much of the life insurance claims process is still done manually, and manual processes both drive up operational costs for the insurer and drag out the claims experience for the customer. The only way to transform the claims process is by digitizing it.

Claims is just a cost center for an insurer. On top of payouts, it costs to process a claim. The cost of a claims journey can be reduced as much as 30% by automation. Robotic process automation (RPA), for example, can automate transactional, administrative tasks that are rules-based and repetitive.

When the upfront work of engaging the customer and beneficiary has already been done, and all necessary information has been verified, all that’s needed should be the bank account number for a smaller policy payout. Of course, for larger policies more scrutiny needs to happen — but building in an automated process can help streamline for larger policies as well, especially with partial payouts as the example given above. This is a growth opportunity for the carrier.

Simultaneously, carriers who implement automations are delivering on their promises to customers by speeding up the process and activating their agents as advisors. This in turn supports a strong cycle of customer and asset retention.

The biggest barrier to claims transformation

It’s time we change our perspective. Let’s not see claims payouts as strictly money out the door. Let’s look at this moment in time as an opportunity to turn the tables.

If we follow the three pillars of claims transformation to build stronger relationships with our customers through digital touchpoints, efficient automation and more empathetic interactions, we open the door for new policy sales. Consider the marketing cost of reaching a new customer. When the carrier seizes opportunities within existing relationships, the cost to sell is reduced significantly.

This means looking at the beneficiary as a customer. Traditionally, the policyholder is our customer. However, if we see each beneficiary as a potential policyholder, we better understand the importance of updating claims, automating systems and utilizing data to improve their experience and retain their business.

In conclusion

There is great potential for life insurers in 2023. Does the industry have some upcoming challenges with aging baby boomers and their more hesitant successors? Absolutely. Does the industry as a whole need to make sweeping changes to the ways in which we operate and serve our customers to meet these challenges? Yes, 100% yes. But, when we do, the benefits are endless.

Imagine a world where life insurance processes are not only simplified and less costly, but customers — inclusive of beneficiaries — are more satisfied and excited to work with the carrier. Imagine delivering on the promise for a more stress-free future. We believe it’s possible, with the right approach to claims transformation.