Claims digitization: Another Kodak moment on the rise?

insurance

Imagine this: you are standing on the edge of a large cliff facing the raging ocean. Below you there is a small sandy beach surrounded by jagged rocks. The view is breathtaking. Slowly you take in the sunset while the wind delicately touches your face. Then you notice the small, wooden rowboat in the water. Two men are struggling to get ashore in their awfully underpowered and ill-prepared vessel. And then, out of nowhere, an enormous speedboat races towards the coast. Its powerful engine forces its fiberglass body smoothly through the water. As it passes, the waves created by its cutting through the water inevitably cause the ill-prepared wooden rowboat to get even closer to its unavoidable demise…

This is the bleak future that awaits insurance companies who fail to adapt to the developments of our contemporary world. Indeed, this is the bleak future that awaits insurance companies who fail to implement claims digitization.

When I asked Cees Werff, CEO of Claims Corporation Network (CCN), a global claims management service provider, about the future of claims departments, this is the answer he gave me. The start of an interesting conversation:

Your message is clear: digitization is necessary in order to move along the developments of the modern world.
“The digitization of things is already everywhere and has revolutionized many traditional markets. Booking tickets, applying for credit cards, renting cars, etc. It is all digital. Claims departments have historically been paper-based and now it is time for them to catch up.”

So what are the main advantages for companies of digitizing the claims process?
“Digital Claims Management provides an opportunity for insurers to preventively lower claims and accompanying costs and to serve customers more efficiently and satisfactorily. Think for example about the ability for companies to interact with clients on a 24/7 basis.”

And for the customers?
“The opportunity to register a claim fast, easy and simple at a convenient moment. This is exactly what the present-day customer wants.”

What percentage of companies currently has a digital claims department?
“At the moment less than 10% of companies offer this service to clients. This is simply because of the legacy systems that they run their operations on. These systems won’t allow the connectivity to a digital process.”

And in the future, do you think all insurance companies will digitize their claims departments?
“Without a doubt. The companies that do not adapt to the process will be out of business and disappear. Think of the ill-prepared wooden rowboat.”

How much do companies stand to save by switching to a digital claims department?
“Through digitization companies could save up to 30% on the current cost base.”

Will the result of not digitizing claims departments be so severe?
“Honestly, I see 25%–30% of all carriers disappearing in the next 5 to 10 years if they fail to adapt. We have seen enough examples in other industries of large players who failed to adapt to the digital shift in their industry and disappeared from the market. Think of Kodak or Blackberry.”

What other world changes do you think will have a major effect on the insurance industry?
“Millennials will drive a change in customer preferences and their expectations have been set by companies outside the insurance industry, for example by Netflix and Uber, resulting in them to demand personalized, convenient, transparent and rapid service. This group will represent more than 50% of the global population by 2020 and they are not willing to interact with companies only during certain hours. They are used to the instant availability of digital communication through their phone or tablet and will not accepts otherwise. The technological possibilities for the insurance industry are there, but this digital development also requires the vision.”

Cees Werff not only names the problems, but also comes with the solutions, benefits, and opportunities. “This is not a doomsday scenario”, he emphasizes. “On the contrary, digitization creates massive amounts of opportunities if you are willing to invest and interact with your customers.”

Interested in furthering this discussion? Come and join us on the 2nd and 3rd of November during the Claims Management and Innovation Conference 2017 in Amsterdam, where many more speakers from the industry will get involved in this and other discussions.

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