Two Sides of the Claim? Certainly, I think people are recognising that good claims management is an increasingly complex area, with many different levers to pull and priorities that are not always shared across the various partners involved. Insurers and brokers may have different views on the best outcome, but what about the customer? What do they expect? What support do they need? And are we actually delivering it?

The following are very personal observations, based on many years working for an insurer, continuing to work on their behalf, but now also becoming more directly involved with brokers, MGAs and BIBA’s Claims Customer Working Group.

The changing expectations of customers during the claims journey

People often say that claims sit at the centre of the customer experience, and they do. Claims are, after all, the product that has been sold to the customer. But does the delivery live up to that promise, or are we seeing operational performance suffer because claims are still viewed by some as a back-office function, a cost centre rather than the promise we sell?

Those organisations that are getting it right recognise the changes taking place and are using technology in the right way.

Customer expectations continue to evolve. For some time, we’ve talked about the higher standards consumers experience elsewhere, and those expectations keep rising. Years ago, we might have referred to the John Lewis standard as something to aspire to. Then Amazon arrived and made interactions simple, transparent and convenient. Today, even that has moved on, with live tracking, real-time updates and services being delivered within hours rather than days in many cases.

Contrast that with arranging for a loss adjuster using phone calls and diary appointments, with customers sometimes waiting a couple of weeks simply for someone to visit their property.

Opportunities to settle claims more quickly do exist and should be embraced. ‘One and done’ initiatives, along with cash settlements (or, more accurately, immediate bank transfers), can help move us closer to the service customers increasingly expect. Even then, however, we run the risk of unintended consequences, but more on that later.

Operational and cost pressures facing claims teams

At the time of writing, we find ourselves in a soft market. While no one will admit there is any link between this and declining service levels, we can all see the reality of insurers looking to cut costs, reducing team sizes and perhaps focusing a little more on the small print.

I’m not suggesting that any specific instructions are being given to handle claims differently during a soft market, but we all see reduced team sizes, and brokers and MGAs regularly comment that any flexibility around the edges of cover appears to have disappeared.

This is not restricted to insurers. Lower premiums may be great news for customers, but reduced commission income for brokers has forced many to reduce headcount or simply not replace staff when they leave. As they work to recover lost income, the focus naturally shifts towards generating new business and retaining key salespeople, rather than those who step in to support customers during their hour of need.

It is easy to argue that claims are not the broker’s responsibility, but I’m not sure I agree. While others may have the primary role, ask any customer whether they expect help from their broker when they need it most, and I’m sure the answer would be yes.

Fewer people inevitably affect service levels. Yes, processes can be improved, and continuing to do things the way they have always been done is not a sensible approach. I’ve often found claims teams to be particularly resistant to change, although I think part of that stems from their genuine commitment to customer service. They understandably worry that change could negatively affect the customer experience.

Even without that concern, we know that large transformation programmes are, at best, a distraction. They often require experienced team members to be taken away from frontline operations to work on future improvements. That investment may well be worthwhile, but in the meantime their absence can have a noticeable impact on the quality of day-to-day service.

Technology, automation and AI within claims environments

It is encouraging to see so much focus on technology within the claims sector. You can barely move for the number of solution providers and technology companies promising transformational change. I’d love to say the industry’s focus is entirely on improving customer outcomes, but the reality is that it is often much easier to secure investment when the business case centres on reducing costs rather than delivering less tangible benefits such as improved customer wellbeing. Of course, the marketing material will usually suggest it is all about the latter.

Insurance is far from alone in facing this dilemma. Decades ago, companies without an offshoring strategy were often viewed as lacking ambition, and that could even affect their share price. Today, if an annual report doesn’t mention an AI strategy, the market can react just as negatively.

My suspicion is that some simplistic market analysis is also looking for the headcount reductions expected to accompany AI investment. Potentially the greatest technological transformation of my lifetime, perhaps even the next industrial revolution, risks being judged simply on its ability to deliver more for less, rather than on its true potential.

That true potential will become clear over time. Perhaps I shouldn’t complain. If finance teams need hard numbers to justify investment, and those numbers unlock funding for technology that ultimately improves customer outcomes, maybe that is enough.

Technology, automation and AI within claims environments (continued)

There are already some excellent use cases across the market, with a number of solutions delivering real value. It is probably unfair to single out individual examples, but we are undoubtedly seeing insurance claims management being transformed through the automation of workflows, improved accuracy, better fraud detection and enhanced customer experiences.

Automated claims processing at the First Notification of Loss (FNOL) stage is an obvious area of focus. Technology can automate the intake, validation and routing of claims, extracting information from claim forms, unstructured data, photographs, voice notes and supporting documents.

We’re also seeing policy details and coverage verified automatically, alongside damage assessment using computer vision and third-party APIs. This can generate settlement recommendations, because we’re not quite brave enough yet to remove the human from the process entirely, or route more complex cases to the appropriate specialist.

The result is shorter claims cycles, reducing timescales from weeks or months to minutes in some cases, lowering manual workloads, improving consistency in decision-making and, hopefully, delivering better customer satisfaction.

Let’s not mention the associated reduction in headcount…

The balance between efficiency and empathy

You may have gathered from my comments so far that I worry decisions are sometimes driven more by potential cost savings than by overall customer outcomes.

When Claims Directors report directly to CEOs, reflecting the true value of claims as the product, the promise and ultimately the reason insurance exists, that seat at the top table helps ensure the customer perspective is properly represented.

By contrast, when claims are grouped under broader operational functions and become part of the Chief Operating Officer’s remit, there may be benefits in terms of consistency and standardisation across the wider business. However, it can also dilute the voice of claims and reduce the focus on the customer experience.

An operation can be efficient, but it is people who make it empathetic. They understand what customers are going through and can shape the experience accordingly.

That said, I don’t want to come across as a complete Luddite. Used properly, automation and AI can actually enhance empathy. By processing vast amounts of information that an individual claims handler simply wouldn’t have time to absorb, technology can identify patterns, understand what matters most to a customer and even recommend the most appropriate way to communicate with them. All of that has the potential to create a better customer experience.

Sometimes I find myself playing devil’s advocate and asking why we shouldn’t remove the human from the process altogether. If technology becomes good enough, why continue relying on people who are, by nature, less consistent and more prone to error?

For now, I think that would be a mistake. When people experience a crisis, they still want the reassurance of speaking to another human being who can demonstrate empathy and understanding. However, I wouldn’t rule it out entirely in the future, at least for certain claim types and customer segments.

If an insurer wanted to offer a completely ‘human-free’ claims service and pass those efficiency savings on to customers, why shouldn’t they be allowed to? It could simply become the next evolution of the industry’s famous promise of “No Clucking Call Centres”, a slogan some of you may remember.

The future direction of claims and its role in insurer reputation and trust

I mentioned earlier the potential unintended consequences of cash settlements. They can be a great way to resolve claims quickly, often costing considerably less than using contractors or other supply chain partners. They may even be exactly what the customer wants, particularly during a cost-of-living crisis.

But what happens if the damage isn’t repaired properly, or isn’t repaired at all?

That is a very real risk. My greater concern, however, is that cash settlements could be used inappropriately as a way of reducing outstanding caseloads when, in reality, the customer needs more support.

I’m not just talking about vulnerable customers either. Most people will never have experienced the complexity of an insurance claim before. They may understandably believe they can arrange everything themselves, perhaps even save some money from the settlement. But if things don’t go to plan, are they then left to deal with the consequences on their own?

We also need to acknowledge that the insurance industry’s reputation is still far from where it should be. Fairly or unfairly, many consumers continue to believe that insurers rely on the small print to avoid paying claims whenever possible. There is a danger that, if we pursue efficiency above everything else, we simply reinforce that perception.

The Which? super complaint, while I believe much of the supporting data was flawed, added further to that negative narrative. I can question some of the statistics used and point to the complexities behind many claims that were initially declined, but none of the insurers named will have welcomed the publicity or been entirely satisfied with the customer experiences highlighted.

Consumer Duty arrived with considerable fanfare. It cost insurers millions in project teams, governance programmes and dashboards designed to help boards better understand customer outcomes. But did it genuinely improve the quality of claims handling? Are we really confident that the service we provide matches the expectations customers have when they buy an insurance policy?

Personally, I think there is still some way to go.

AI and automation absolutely need to be embraced, but not if the result is simply “computer says no” without explanation, flexibility or empathy.

I actually think the industry is working well with both the regulator and the Financial Ombudsman Service, learning from each other and improving as we go. The direction of travel is clear. We need to do better. We need to give customers more choice. We need to deliver the outcomes they expect, and we probably need to become more flexible in the way we design and apply cover.

I believe we can achieve that.

When I look back over more than 30 years working for a major insurer, I’m proud of how far we’ve come and how much better we have become at helping customers through difficult times. We get businesses back up and running. We help individuals rebuild their lives. We continue to fulfil the fundamental purpose of insurance by spreading the risks of the few across the shoulders of the many.

But we shouldn’t rest on our laurels. As I’ve said throughout, there is still plenty more to do. The opportunity is there for us to take claims handling to the next level.

Onwards and upwards!

David Williams, Insurance Industry Chair, Senior Executive & Non-Executive Director