Our earlier research told us that what customers really care about in Insurance is Claims Processing. Getting paid, promptly, without a lot of added stress after a traumatic event, matters a lot more to customers than attributes such as quality of user interface. Seen from the other side, claims can often have fraud and so managing the Claims Process properly is one key to running a profitable Insurance business.
In short, the details matter, so we decided to interview somebody who really understands the Claims Processing details – Pat Kelahan.
Q. Please tell us a bit about Pat Kelahan
I am a father of seven, husband, multi-tasker and someone who strives to see and communicate the need to keep customer service as the focus of business, including insurance. Having been involved in insurance claims assessment and management for almost twenty years, retail and business ownership for another decade and one half, and construction/disaster work, my customer-focus has seen many iterations. In addition to the direct work of insurance I have remained a student of the industry, gaining understanding of how the ‘pieces’ fit together, and how effects on one facet affects the others.
My current role is as Building Consultant/Forensic Market Strategist for H2M architects + engineers, a large engineering firm located in Melville, NY. How does that keep me in the insurance world? Well, the firm has an active division that assists property insurance carriers with forensic cause and origin work, including assessing mold, asbestos, and environmental damage claims, and consulting with adjusters for understanding of what causes claims. In addition, I am charged with helping the firm anticipate changes in property insurance and what comes next. Toward that end I network extensively with insurance stakeholders across the globe, and have introduced the insurance persona, ‘The Insurance Elephant’, to better focus the industry’s need to keep customer service in all it does, particularly as InsurTech efforts evolve. My duties also include presenting at industry conferences, conducting industry training, and consulting on building damage with insurance adjusters and others within the industry.
I have a graduate degree in business from a top 50 university, have served as mayor of a village in upstate, NY, and been seated as a member of boards for not-for-profit organizations.
Q. In which segments do you think we will first see big breakthroughs in Claims Processing?
Significant changes are being seen in claims processing now, but since insurance is comprised of many lines in many markets and in the many facets of the business, the changes need to be looked for. Also, the InsurTech (the integration of digital innovation and the insurance business) impetus currently active within insurance is well-known within the industry, but not so well known by its customers. The point? Processing innovations have been in general transparent to customers. Sure, there’s online access and application-based transactions, but considering most customers only interact with their insurer at the point of purchase, claims processing changes have not been the primary focus of carriers. Much has occurred on the expense side of the business- underwriting, distribution, and sales, but not as much on a cost-equivalent basis for claims. If claim costs are 75% of the business, that portion of the business has been sorely under-represented in innovation efforts. Industry watchers celebrate the $40 billion or so that has been invested in InsurTech efforts over the past few years; that sum while large, is insignificant compared with the $10 trillion or so in premium volume accounted for by carriers during the same period.
What will we see, therefore, as the big breakthrough in claims processing? The recognition that the administrative handling of claims remains generally unchanged even in the light of InsurTech efforts. Efforts to date with ‘tech-ing up’ claim assessments, drones, virtual damage capture, vendor access to systems through APIs have been a good start but remain mired in the rote of manual process and repetitive admin liability. Pair the inertia of admin with the still huge volume of unstructured data and like an addictive person, the industry needs to recognize the problem before it can move to a resolution. All along the insurance customers’ needs must remain paramount and need to be the starting point of all innovation.
Q. What do you consider to be the most important InsurTech innovation that you have seen in the last few years?
There have been many significant innovative ideas brought to the insurance industry since the InsurTech impetus followed FinTech’s success three to four years ago:
- API interfaces between carriers and stakeholders
- the advent of the use of mechanical/digital assessments of claim damage
- application of new and greater breadth data sources in underwriting, catastrophe preparation and assessment,
- granular hazard assessment and categorisation
- robotic process automation
- integration of artificial intelligence and machine learning within all aspects of insurance, application-based sales and service for customers
- policy and sales aggregators that provide immediate and varied choices for customers
- suggestions that blockchain/secure chain distributed ledgers and smart contracts will revolutionize insurance data validation, the Internet of Things will pre-empt the need for claims, among many other innovations.
However, what I suggest is the most important InsurTech innovation has been the advent of the ecosystem-based, application leveraged sales of micro policies that have added hundreds of millions of previously uninsured persons to the ranks of insureds, primarily within the China market. Absent the advent of AI and tech infrastructure to support underwriting, processing and sales of these policies through a central, accepted platform these hundreds of millions could not be served. And, the technology is promising in terms of carrying the methods into other markets where additional hundreds of millions are under-served.
In what country do you see the most important InsurTech innovation?
The prior response suggests this answer is China, and I would not dispute that. I would say that China represents the greatest importance in terms of scope, but I would also remind the reader that similarly important, less wide -spread successes have occurred elsewhere. For example, app-based bicycle insurance is taking hold within India where bicycles are a key form of transport, and a firm in Germany has introduced a very effective health insurance platform where customers can through online actions submit and be paid for health and accident claims. Natural hazard risks have been assessed and made available to carriers and insureds in manner that allows detailed assessment of insurance needs. Carriers can take proactive steps, even creating claims, when an insured’s dwelling is in immediate risk of damage, solely based on data analysis. Farmers in remote regions of the world can obtain parametric cover to protect against financial loss of crops. The list is long, but I retain the right to support that based on the volume of previously uninsured persons now having cover due to InsurTech innovation, my answer remains China.
Bernard Lunn is a Fintech deal-maker, investor, entrepreneur and advisor. He is the author of The Blockchain Economy and CEO of Daily Fintech.
Check out our advisory services (how we pay for this free original research).
To schedule an hour of Bernard’s time for CHF380 please click here to send an email.