Insurers are quickly entering a new era of claims management—one supported by rapid technological advancements and growing data availability.

These new developments provide unprecedented visibility into the claims process, the changing preferences of customers, and the expectations of a new generation of employees who demand a digital experience.

Every touchpoint in the claims journey, starting even before an incident occurs, will be supported by a mix of technology and human intervention that seamlessly expedites the process.

According to McKinsey Global Institute Research, the COVID-19 pandemic further accelerated advancements and prompted a wave of innovation and investment that affected employees and customers alike.

New Era of Insurance Claims Management

Insurers accelerated their adoption of next-generation capabilities in digital engagement, automation, AI and advanced analytics. In a recent survey, 85% of executives said they increased the digitalization of employee interactions and engagement in the pandemic.

In the process, companies broke down cultural, structural, and other barriers that previously had impeded innovation. For insurers, this means they are now considerably closer than they were in 2019 to realizing their vision of claims processing in 2030; most have a solid foundation on which to continue building.

The varying extent to which users readily adopted digital tools during the pandemic—for example, conducting appraisals virtually, based on photos or videos, rather than in person—also highlighted the generational differences among employees and customers.

Digital natives—millennials and Gen Zers—increasingly expect seamless, omnichannel, and real-time interactions integrated with the platforms they already frequently use.

Carriers will need to balance the needs of these younger cohorts with those of older ones, including Gen Xers and baby boomers who don’t have the same preferences or facility with digital interactions. Meanwhile, the customer and employee demographic mix will shift dramatically between now and 2030, at which point digital natives will make up nearly half of the adult population.

Technology will continue to evolve at a breakneck pace. The Internet of Things (IoT), smart homes and businesses, self-driving vehicles, and wearable computers will promote instantaneous data sharing across ecosystems. Insurers will know substantially more than they have in the past about customer risk profiles and behaviors. They will recognize fraud more easily and adjust claims faster and more accurately.

Digital advances and powerful new analytics will help carriers intervene at the right moments to launch marketing, make sales calls, reduce risks, prevent losses, and tailor products and services.

Of course, advanced capabilities come with great responsibilities. Insurers must devise strategies and governance policies to balance both their customer and societal responsibilities.

They will need to ensure they use customer data wisely, address privacy concerns, and engage in ways that customers will welcome and appreciate at the time. They will need to adopt future processes that address their overall corporate sustainability goals. Otherwise, insurers risk alienating customers and damaging their reputation.

We can also expect to see changes that defy prediction. Entire industries, from video rental stores to car services, disappeared almost overnight when disruptors appeared with new business models and value propositions. As change accelerates, only insurers with an agile culture and operating model 6 will keep pace with radical innovation.

In this respect, the pandemic has served as a testing ground for insurers.

Companies pivoted overnight to embrace remote work and customer engagement, and they experimented with new ways of managing their employees and meeting customer needs.

The most successful claims leaders adopted flexible workforce models and empowered their managers with effective management systems and new ways to support and engage with employees. Despite having made these adjustments out of necessity in the moment, companies can now use them to bolster their reputations as employers of choice in a tight labor market.

The most successful claims leaders also responded with agility, redeploying resources—for example, to respond to unprecedented surges in claims in certain lines of business or to compensate for the shutdown of business-process-outsourcing (BPO) providers—while rapidly pivoting technology teams to deploy new tools and automation.

Claims leaders’ ability to act, learn, and adjust in a virtuous cycle not only helped during surges but also prepared them to accelerate their claims 2030 journey when the pandemic recedes.

To prepare for a claims future that’s now closer than many expected, carriers should concentrate on five areas: empowering the claims workforce, redefining proactivity, reimagining the insurer’s role, evolving the claims ecosystem, and transforming talent.

Empowering the claims workforce

Leading claims organizations will continue to combine and harness the best features of AI and human intelligence—and eliminate the blind.

Empowering the claims workforce

Simple claims

For simple claims with predictable characteristics and patterns, the technology to enable full straight-through processing already exists, and the barriers to adoption have fallen significantly during the pandemic. In the near term, insurers can deploy AI-enabled technology to handle every step of the claims process and choose when to engage with customers based on their communication preferences. Leading claims organizations have already made significant progress on this journey over the past two years.

The following scenario describes how the new process could work:

At first notice of loss, customers can control how they notify their insurance company, whether automatically—for example, via sensors in their home—or by filing a claim through their channel of choice.

To enable this, the insurer will need to implement a suite of digital tools such as a customer-facing mobile app and a claims portal, which are fully integrated with its claims management system and third-party data sources such as smart-home systems.

The most sophisticated carriers will use advanced analytics to quickly segment and route each claim to the appropriate claims handler and resolution channel. For damage appraisal, an AI algorithm reviews photos and videos submitted by the customer, generating an initial estimate for damage that the insurer shares with the customer and a repair vendor. The customer could then use the insurer’s app or website to arrange temporary housing and choose a time for a contractor to make repairs, all while monitoring the progress of each step of their claim.

Some customers may choose never to speak with an adjuster, preferring instead to receive a digital notification when their claims process has been completed. Others may prefer to interact with a digitally enabled claims handler—such as via a phone call to say the claims process has been completed and payment has been made.

Complex claims

In comparison, even in 2030, the most complex claims will continue to be handled by humans who can bring true empathy and expert judgment and who are adept with new tools. Despite recent technological advances, these claims will require more nuanced judgment in customer and stakeholder interactions than AI-based tools can provide, as well as a larger underlying data set to build an effective algorithm over time.

Cognitive “whisper agents”—tools that provide relevant information to aid in decision making—will automatically guide complex-claims handlers in their customer interactions.

This will help to expedite claim processing times, eliminate points of friction between customers and insurers, and even help companies reduce adjustment expenses while ensuring the most accurate claims handling.

With the assistance of cognitive agents, handlers can rely on analytics-enabled dashboards to rapidly diagnose claim outcomes and offer customers next steps and resolution paths. For example, medical-treatment analytics can alert an adjuster that a workers’ compensation claimant has not completed some necessary treatments, prompting the adjuster to follow up with the claimant and notify the customer.

Personalizing the claims experience

Consumer expectations are rising across the board as companies apart from the insurance industry offer better, faster, and more customized experiences as part of their standard offerings. Leading insurers will redefine the claims experience to seamlessly anticipate and meet customers’ needs.

Personalizing the claims experience

A claims department may communicate updates or next steps, for example, based on customers’ engagement preferences, whether by means of social network apps; text messaging; a one-stop, omnichannel hub; or another method. Using video and data-sharing capabilities, claims teams will provide customers with rich, real-time information, answering 100 percent of claims status questions digitally and eliminating the need for phone calls—unless the customer prefers the added benefit of a human touch.

Customized experiences come in many forms:

  • An auto customer may receive a steady stream of automated repair status updates via text messaging, with the option of watching a video of the car repair.
  • A property customer may visit an insurance company’s online claim hub to see photos and videos of a roof repair and communicate directly with emergency mitigation services about damage that requires further attention.
  • An automated “claim concierge” may guide each customer and claimant through the claim process, minimizing the actions required by the adjuster.

These scenarios will require insurers to rethink their traditional approaches to claim segmentation, which, until now, was based largely on claim characteristics and treated all customers the same. They will instead need to create customer microsegments based on each customer’s unique preferences, which they can use along with claim characteristics to ensure each customer has a seamless experience and the claim is handled appropriately. This will require rethinking the entire claims customer journey to introduce customer choice and offer customers the ability to choose how and when they want to interact with insurers.

However, insurers that succeed will create a seamless customer experience and streamline claim operations (for example, by reducing redundant calls to claims centers, thus creating capacity for claim handlers to perform higher-value work such as handling more complex claims or providing support to the customer in their moment of need).

Reimagining the insurer’s role

As AI-enabled tools create more capacity in claims organizations, insurers will have the ability to further differentiate themselves by dedicating additional resources to claim prevention.

Preventing claims before they occur will fundamentally change the relationship between insurers and customers—from one focused on accidents or losses to a partnership with a shared interest in loss prevention.

This shift also positions insurers to transition from a risk transfer model to a risk mitigation model.

In the future, telematics capabilities coupled with connected devices—health trackers, sensors, and mobile phones, among others—and third-party data such as weather forecasts will alert customers and would-be claimants to risks before losses occur.

AI enablement creates many new ease-of-use opportunities for customers:

  • In cold climates, sensors in buildings will alert owners and insurers when indoor temperatures get low enough to freeze pipes and will automatically trigger smart thermostats to turn up the heat.
  • In areas vulnerable to hurricanes, smart homes will automatically deploy hurricane shutters based on weather notifications sent by the insurance carrier.
  • In manual-labor jobs, sensors embedded in workers’ clothing and machines will prevent physical or mental fatigue by prompting workers to take breaks. When workers step out of “safe zones,” sensors monitoring their movements will send an alert that stops their machine automatically, preventing injury.
  • Similarly, in other businesses, an organization could install new flooring that changes color when wet to highlight hazards that could lead to injuries.

From a technology standpoint, all of this is possible today, making it reasonable to imagine these scenarios by 2030—assuming insurers can drive customer adoption at scale in a way that is economically viable for themselves and their customers.

Evolving the claims ecosystem

Innovation is accelerating throughout the insurance ecosystem as participants—insurers, insurtechs, OEMs, weather information providers, law firms, AI service providers, IoT solutions providers and aggregators, and many others—push the boundaries of the possible and private-equity companies provide ample capital to take advantage of the opportunity.

In the new claims ecosystem, third-party infrastructure—such as street and factory cameras; telematics; and native sensors built into cars, wearable devices, and machines—will give carriers automated access to basic facts of loss.

Customer- and claimant-provided photos and videos will further enrich information available to insurers. With the right computing tools and analytics, carriers will be able to determine liability more quickly and make more accurate appraisals and damage assessments—increasing the share of claims that move from submission to settlement in one click.

Evolving the claims ecosystem

Sensors alone can help to preempt insurance claims and complications:

  • When sensors indicate that a sump pump has failed, the insurance company can automatically search local retailers’ inventories and facilitate ordering necessary parts, accelerate repairs, and reduce the risk of water damage.
  • Similarly, sensors inside a company-owned car involved in an accident will provide data on the point of impact and speed of travel. The insurer will combine that information with video from traffic cameras to re-create the accident and determine whether the employee was at fault. Using advanced analytics driven by claim characteristics, in conjunction with repair shop timelines and performance ratings, insurers will generate claim-specific repair shop recommendations for each customer or claimant involved in an accident.

Expanding the claims ecosystem will also enable insurers to move beyond traditional claims activities into adjacent businesses to access customers earlier and deepen customer relationships.

An insurer could expand into claims prevention via auto maintenance and repair or even assist customers with used-car purchases to help them select a well-maintained vehicle.

Insurers can unlock value in the industry—and create value for their own organizations—by expanding their role beyond the manager of select relationships to the integrator that gathers data and insights from myriad third-party providers and insurtechs. Achieving this integrator role will be difficult, requiring a targeted digital strategy, and other qualified ecosystem participants—such as providers of claims management systems—will also be vying for it. Whoever succeeds will attain a competitive advantage by owning access to coveted data and information.

Transforming talent skills

As insurers work to realize their 2030 claims vision, transforming their talent will be critical to the effort. Claims leaders will need to navigate a transitionary period as some roles are reduced, others evolve, and new ones are created.

Based on the latest research from the McKinsey Global Institute on the impact on jobs of pandemic-driven technological advances, claims organizations should prepare themselves for significant change: insurers could see a reduction in employment of up to 46% for claims handlers, examiners, and investigators and up to 75% for claims and policy processing clerks.

As insurers work to realize their 2030 claims vision, transforming their talent will be critical to the effort

As the number of traditional claims roles decreases, claims roles will also undergo an evolution. The claims handler position will split into two roles: digitally enabled customer advisers for simple claims (who will focus on providing empathy to customers and supporting them along their claims journey) and digitally enabled complex-claim handlers (who will focus on resolving the most complex and technical claims not yet capable of being handled by automation).

New positions will be created in claims prevention, which may provide a natural transition for today’s claims field appraisers. Demand will increase for talent to fill technical and specialist roles, specifically in data science, product management, and IT as new roles are created for claims technology product owners and digitally enabled quality assessors to ensure that the AI-enabled tools function accurately and make the expected decisions.

The emergence of these roles will require insurers to build their technology skills as well as their social and emotional skills.

As the AI engine replaces many tasks requiring basic or even some advanced cognition, claims handlers will shift to providing empathy and excellent customer service.

Last, in the rise of automation, claims organizations should be increasingly mindful of diversity, equity, and inclusion. As in many other industries, insurers employ women and people of color predominantly in entry-level positions that are most susceptible to automation.

Claims leaders will need to carefully think through their overall talent strategy—including where to deploy talent and who in the organization might be best suited for each future position—while also ensuring they proactively focus on upskilling and reskilling critical populations.


AUTHORS: Deniz Cultu – partner in McKinsey’s Minneapolis office, Kristen Ganjani – partner in the Chicago office, Elixabete Larrea – partner in the Boston office and Michael Müssig – partner in the Munich office.

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