N100 Benchmarking: Digital Processes and Predictive Fraud Scoring on the Rise Among Insurer Claims Capabilities

Insurers of all types and sizes have invested in digital claims and fraud analytics capabilities in recent years. These investments reflect the importance of digital processes for modern insurers. It is a trend that’s likely to continue as COVID-19 drives digitization and process improvements.

Claims capabilities often have gaps between property/casualty and life/annuity insurers, which reflect variances in claims processes. Life insurers are also investing in these areas, though their capabilities are comparatively less mature; fraud analytics is an area of significant pilot activity, particularly among large life insurers.

The Novarica 100 Framework includes 12 capabilities in each of eight functional areas: product development, marketing, distribution, underwriting, customer engagement, billing, claims, and finance/operations. These capabilities are divided into four digital, four data, and four core functions. There are also four additional capabilities specific to the operations of IT, adding to an even 100.

Digital capabilities in claims include fully digital processes, encompassing extensions of digital access to service providers, mobile FNOL, and telematics- or IoT-based data capture.

Data and analytics claims capabilities include analytics to predict fraud, claim severity, and subrogation, any of which may leverage internal or external data. Machine learning to refine these models automatically is an emerging technology in this area.

Claims core capabilities include straight-through processing, routing incoming claims based on adjuster skill sets, omni-channel CCM, and APIs externalizable to service partners.

Claims digital capabilities have been an area of growth for insurers in recent years. Digital processes are approaching table stakes among P/C insurers: More than 80% of large insurers and nearly 60% of midsize insurers have capabilities. Nearly 50% of life insurers have some capabilities for digital processes.

This trend is likely to continue as ongoing remote work pushes insurers to digitize. Insurers could skate by with “mostly digital” processes and a few paper-based steps (e.g., mailing checks) before COVID-19, but pandemic conditions have shown that such gaps can constitute real logistical hurdles.

Data and analytics capabilities for claims aren’t yet table stakes, but more insurers are deploying them. Predictive fraud and severity scoring are the most widely deployed. Insurers have been more likely to deploy machine learning for underwriting, but about a third of large P/C insurers have pilots to explore machine learning for claims analytics.

The N100 framework is also available as a self-rating tool for insurers; if you’re a Novarica client or Research Council member interested in benchmarking your company, feel free to contact [email protected] to receive a copy.

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