An insurance company receives premiums, manages reserves and pays out claims. Traditionally actuaries have been using the claim data to assist them with calculations of premiums and reserves and to perform actual versus expected claims comparisons. Today we are also seeing how actuaries are playing a more prominent role in risk management, and they are turning to technology to assist with combating operational inefficiencies and fraud that plague the claim process.
Claims management has traditionally been a cumbersome and very manual process, complicated by the various types of claim sources. For example, a traditional insurer may receive claims from various brokers and reinsurers will process claims from the various insurers. In some countries, several different claim service companies assist the policyholders. Claims generate a lot of data and sometimes require an experienced adjuster, an investigator (if high fraud potential), a defence counsel (if high litigation potential) or additional resources. Claims are also time sensitive as delays negatively impact the policyholders. Therefore it is worth considering technology that can handle the amount and complexity of data quickly and efficiently.
Centralising the Data
A typical insurance company holds its brokers and claims service companies’ data on spreadsheets, files and manual documents. The data has a high exposure of being out of date, and all this information is spread across numerous departments and offices in different locations and jurisdictions. One solution is to allow the insurance company to standardise the data capture based on data profiles in one place accessible to all eligible stakeholders in the company via access profiles. Each third-party service company has a profile where they can access their data and edit it to be up to date.
This centralisation provides auditability of the claim and traceability of the data and allows the insurance companies to satisfy regulatory requirements around data integrity regardless of the data ownership. It is a real benefit for all parties to have up to date information when dealing with a claim.
This information is crucial from an actuarial perspective as the actuary can easily query this centralised and standardised data to find out what exposure the company has to a specific supplier or sector. This data can be aggregated and fed to a live dashboard to assist with general monitoring of the claim process. The actuary can apply powerful analytics to perform near real time actual versus expected monitoring of claims paid versus claims modelled.
Raising the Flag
Once all the brokers and claim service companies are submitting claims on a single platform in a standardised manner, algorithms can be written to identify potential noteworthy events. The algorithms continuously work in the background and assist with assessing ongoing risk exposure. The algorithm can rank claims risk profiles as low medium or high. The platform can then be used to request and receive new information. Previously, this process has been very manual and time-consuming.
Benefits of technology
Software created specifically for claim management can drastically reduce the administrative burden, and it can increase the speed and efficiency of the audit, governance and regulatory processes. If implemented correctly, it could substantially reduce costs.
The decision to overhaul the claim management process with a technology solution is no lightweight endeavour, and it requires financial resources, effort and time commitment. Therefore senior stakeholders have to support the initiative and include it in the budget. Next, the problems that need to be solved have to be clearly stated so that a product specification document with workflow processes can be drawn up. Finally, there needs to be a buy-in from the actual people who work with the claims on a day to day basis. The technology can be hosted in the cloud so that insurers don’t need to make any changes to their IT infrastructure and after some initial training, the solution is ready to go live.
Role of the Actuary
Actuaries can work with the vendors of the claim management technology and assist with the drawing up of the product specification documents. Actuaries will be able to provide insight around the risk flagging algorithms as they can draw from their experience around claim analysis. All vendors come with a certain amount of third party risk and actuaries will also be in a position to identify, measure, manage and monitor this risk. Overall the actuaries make the integration more efficient.
Looking to the future
Blockchain’s immutable property could help with auditability, and Machine Learning could help with flagging deep risks that the current algorithms miss. However, claim management can already benefit with tried and tested technology; centralised databases and simple algorithms will be a leap forward from the dispersed spreadsheet and manual processes. Actuaries can tailor the algorithms and create new tools on top of these platforms to assist them with managing the risks around the claim process.
Adam Richards, COO Albany
Michael Jordan (FASSA/CERA), Dupro Advisory
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