Automation to simplify insurance claims

By Olly Savage, director of sales and business development, Verisk

8 April 2020

Arbitration, a means of resolving disputed cases through a third-party mediator, offers an attractive alternative to solving complex claims through the courts. When paired with automation, it has the potential to deliver cost and time efficiencies across claim operations, which are experiencing pressure in three key areas:

  1. Costly court cases are a growing problem

Resolving claims can be complex, especially if they involve personal injury as well as vehicle or property damage. Managing the claim, deciding liability, and attempting to resolve the claim fairly take time. But where liability cannot be agreed by all parties, court action may be inevitable. Claimants could even turn to claims management companies out of frustration, further increasing costs.

For insurance companies and claimants alike, resolving claims through the courts is expensive and filled with uncertainty, all made worse by chronic court backlogs. This means insurers and claimants face a seemingly indefinite wait for resolution and confirmation of payouts and liability, while management and legal costs continue to mount behind the scenes.

  1. New regulations bring uncertainty

Despite new government legislation and advanced technologies in the insurance industry, there has been limited success at controlling claim costs. It is now important that insurers actively work to solve these problems as claimant behaviour and injury reporting trends continue to evolve.

For insurance operations, the impact of the UK personal injury reforms, on course to be enacted this year, is uncertain. Shifts in the costs of settling personal injury claims – evidenced with previous changes to the discount rate – are highly likely, as are changes in claim volumes and types.

  1. More extreme claims predicted in the future

The number of small claims is likely to decrease in the coming years following the announcement to raise the small claims track limit from £1,000 to £5,000. However, this may result in average claim severity increasing, similar to the case of claims displacement uncovered in a 2017 Verisk analysis that contributed to the UK government’s whiplash reform consultation.

Pushing claims above the threshold would make compensating insurers liable for a claimant’s legal costs. Simultaneously, managers and claims team leaders are coming under rising pressure both to control loss adjustment expenses and improve operational efficiency. As the volume and complexity of claims rise, so does the challenge to limit claims indemnity spend.

Introducing arbitration: A cost-effective third-party solution

Arbitration offers an alternative course to legal action. Agreeing to resolve disputes through arbitration means insurers can avoid the costs associated with unresolved cases, and claimants can receive a timely, evidence-based resolution from an independent third party.

Pursuing a resolution through arbitration allows insurers, claimants, and any designated representatives to work to standard time frames, prepare evidence, and communicate updates to the arbitrator ahead of their review.

Automation paired with arbitration as an alternative to court claims

For arbitration to succeed, insurers need to make certain it does not fall victim to the same problems facing litigation, such as delays, inefficiencies, and increased costs. Technology developments can drive this process, with automation helping insurers throughout the life of a claim. Arbitration should be no exception, yet the consensus of the UK’s Civil Justice Council in late 2018 was that alternative dispute resolution (ADR) is both underused and too obscure.

By switching from manual processes in ADR and escalation to a dedicated platform with extensive automation, insurers can lead the way in using alternative dispute resolution to their advantage. This will unlock benefits for all parties, linking together claimants, insurers, and arbitrators for real-time case updates and exchange of relevant claims information.

Dedicated platforms improve business insights

Platforms that harness the power of automation offer an efficient alternative to claims litigation and allow insurers to advance disputed claims to resolution modules with a clear framework and defined time limits. Adopting a dedicated platform also means a wealth of previously unrecorded or siloed information can be captured to provide valuable business insights into claim outcomes.

Insights into outcomes, in fact, may be the greatest long-term benefit of using an automated platform. Captured data may include the volume of claims resolved through arbitration or escalated to litigation as well as associated outcomes and costs. This can provide claims handlers with decision support for their litigation management strategies, even as claim trends may change over time.

Streamlining claim processes for claimants and insurers

Choosing arbitration as an alternative to court-based claims can be advantageous for claimants as well as insurers. Claimants are not burdened with the uncertainty of the court process; rather, arbitration allows them a solid resolution date and a fully independent evidence-based judgement on liability, without the added cost of high legal fees. Insurers avoid paying hefty litigation and management costs and no longer have to write off significant sums as simply ‘unavoidable costs’ when dealing with complicated litigated claims.

Moving arbitration from a manual process to a dedicated platform with high degrees of automation represents another successful step towards end-to-end automation and true ‘right touch’ claims – streamlining settlement of meritorious claims by minimising manual touches and activities while monitoring for the ever-present threat of fraudulent claims.

For the full potential of automated arbitration to be realised, data needs to be available from multiple third-party channels, such as a historical backlog of personal injury claims data through the MoJ and small claims portals. Only by collating information from a wide range of sources on a single platform can insurers achieve a highly automated, successful arbitration process.

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