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Strategic leadership starts with claims

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    April 2024

    The insurance industry is changing at hyper-speed, driven by technology, shifting customer expectations, and our recent disruptive pandemic. Now more than ever, organizations need fast, insightful feedback and are discovering, or rediscovering, the front-line guidance that claims can provide to the business.

    A perfect illustration is the COVID-19 pandemic, when we needed to quickly understand the business impact of the sudden disruption. In our organization, the claims team distributed a report whose complexity and relevance grew every day. This real-time data, coupled with insights based on deep knowledge, was a crucial source of guidance in the absence of the usual models and experience studies.

    This scenario plays out all of the time. That is why life, critical illness, and disability insurance organizations need to rely on the hands-on expertise of claims professionals, particularly when investing in advancements to accelerated underwriting programs, new products, and automation. Claims professionals are first to see the impacts of these advancements and will be aware of any related legislation and regulations on the horizon. That’s why they can (and should) play a conductor role on the speeding train of change.  

    Accelerated underwriting   

    Accelerated underwriting (AUW) is defined as the waiving of traditional underwriting requirements (e.g., fluids) for a subset of applicants that meet favourable risk requirements in an otherwise fully underwritten life insurance process. AUW in Canada is continually progressing and looks different for each of the 14 carrier participants who reported having an AUW program in Munich Re’s 2023 Individual Insurance Dashboard, an annual survey of 17 Canadian life carriers.

    In this evolving area, claim professionals can help identify the impact of AUW programs on claims. They can spot disconnects between the applicant and insurer, such as nondisclosure, partial disclosure, or outright misrepresentation. Claims might also be the first to discover possible mortality slippage by target market or distribution channel long before an experience study could.

    Because of this, claims personnel should be a critical part of AUW steering committees. A practice as simple as tracking undefendable misrepresentations could prove valuable to steering committees and result in stronger fraud language in applications or improved pre-issue analytics. 

    Investing in claims analysis

    At Munich Re we have been investing in tools based on extensive data modelling to enhance client claim processing reduce consumer claim cycle times while focusing claim resources on more complex claims. Beyond the obvious efficiencies of time and more effective staff deployment, we have delivered expense reductions and process improvements to our clients. The claims tools below are examples of the arsenal of innovative client solutions we have created for underwriting, operations, and innovation. 

    CIRCA (Critical Illness Rapid Claims Assessment): Critical illness claims adjudication is a complex process, and claims assessment represents a multifaceted challenge often necessitating extensive human involvement, resulting in an average claim processing time exceeding several weeks. However, by using machine learning algorithms to discern which claims are more likely to have material misrepresentations or not meet the criteria for approval, we have modernized the claims triage process, leading to a more efficient utilization of resources (staff and medical consultants). Having their focus on claims that went through the triage tool added a consistent and structured approach to the adjudication, saved time for claims assessment, and helped focus the team on claims that warranted more attention. It also implemented a methodology for claims training, and we have identified a direct saving of resources and money with improved practices and enhanced medical consultant utilization.

    LTD Claims Scoring (Long-Term Disability Claims Scoring): This web-based tool is designed to predict, based on past experience, the probability of a return to work on a claim according to a tested model. Since LTD claims represent a large volume of claims with high reserve amounts, the tool was developed to assist case managers in identifying claims requiring significant time and effort investment (e.g., rehab, IME, medical consultant opinion). It also allows us to quickly identify cases exceeding past resolution prognosis and determine the best course of action on the claim and accurately predicts outcomes with an interface customizable to user needs, their best practices, and past experience. Designed with a focus on precision, performance, and information security, the tool minimizes the need for identifiable personal data while employing cutting-edge artificial intelligence algorithms for precise and reliable decision-making. It was also developed to facilitate a more efficient workload by assigning cases and balancing them among the case managers by sending the appropriate file according to the case manager's approval level and expertise. Managers can utilize results from the tool for quality checks in files and for internal training.

    Automation and digital partnerships

    The claims function itself is in the midst of rapid technological change. New solutions are improving efficiency and decision quality by automating manual tasks that allow the staff to focus on more value-added activities. This need is particularly acute, considering programs like AUW have the potential to increase claims volume.

    Digital partnerships with insurtechs can deliver speed and modern solutions for a range of claims functions, including fraud detection, return-to-work readiness, claim processing, beneficiary payments, and client service. Claims can play a critical role in the digital partnership process by evaluating innovative solutions from a staffing and decision perspective. In our fast-changing environment, it is also essential to find the right partner who understands today's challenges and can offer reliable and practical solutions for disability management. We have successfully worked with The Claim Lab, which provides solutions to understand issues that can complicate a successful return to work from both medical and non-medical aspects. The Claim Lab has developed advanced techniques for assessing these factors that help gain a more holistic view of the claimant as an individual, which can be used in the analytics process.

    Given today’s resource challenges, this is easier said than done, and outside expertise may be required. For example, Munich Re has evaluated over 400 insurtechs to date and has created partnerships with those bringing proven strategies to the market. Our busy clients appreciate the guidance, and this work also supports innovation within the industry. 

    Regulations and legislation

    While not as fast-paced as the development of accelerated underwriting and digital health data, claims also sees the early impact of regulatory change on the business and can have a voice in creating guidelines. The AMF (Autorité des Marchés Financiers) requirements for improvements to critical illness insurance sales and consumer understanding is an excellent example of regulatory change leading to improved consumer confidence and potential sales lifts. Munich Re’s VP of North American Claims recently volunteered to develop the CLHIA Consumer Education publication and the companion Advisor Education publication in collaboration with individuals from different disciplines from large and mid-sized insurers. 

    Insurers can experience increased costs due to regulatory compliance and litigation. Claims can provide immediate reporting to pricing and underwriting on claims that could not be rejected due to provincial regulations versus insurance law. Claims can also provide an annual review of the impact of litigation or new regulation. 

    Claims as conductor

    Insurance products are developed with expectations about how they will be bought and used. However, it is at the time of claim when carriers first see how insureds use their benefits. As first responders, claims professionals can provide much-needed guidance based on their extensive understanding of claimant behavior and policy provisions.

    COVID-19 demonstrated the importance of claims’ voice in the business. Armed with data and know-how – and given a mechanism to share insights – claims professionals are not simply spectators but conductors to help steer the business to success.